WASHINGTON (AFP) – The world’s top finance leaders said Friday order was returning to financial markets but warned of lingering instability likely to dampen economic growth as they turned up the heat on China to ease its currency restrictions.

Representing Britain, Canada, France, Germany, Italy, Japan and the United States, Group of Seven ministers convened on the 20th anniversary of the Wall Street stock market crash, and US Treasury Secretary Henry Paulson said today’s financial market upheavals were very much on their minds.

“The general feeling around the table was that there are some markets returning to normalcy as risk has been reassessed and repriced,” Paulson told a news conference after the talks.

“In other markets, that reassessment will take longer.”

While the global economy is now in the fifth year of “robust” momentum, “recent financial market turbulence, high oil prices, and weakness in the US housing sector will likely moderate this growth,” the ministers and central bankers warned in a statement.

They noted that the functioning of financial markets was improving after having been rocked by a credit crisis, a byproduct of the meltdown in the US subprime — or high-risk — mortgage market.

The upbeat assessment however came with a note of caution.

“Strong global fundamentals and well-capitalized financial institutions provide a sound and resilient basis but uneven conditions are likely to persist for some time and will require close monitoring,” the ministers said.

The meeting in addition called for action to prevent future turmoil, stressing that market players had to police themselves.

“We expect market participants to address many of the shortcomings that were exposed by recent events,” the statement said.

The United States has come under criticism for allowing loose lending practices to flourish in a climate of low interest rates, which fueled a years-long housing boom, speculation and the emergence of little-understood complex financial instruments backed by mortgages.

The real estate bubble burst last year, triggering loan defaults and foreclosures as well as a credit crunch that spread worldwide, roiling markets in August.

“Our response to recent financial turbulence must be based on full analysis of its causes,” the G7 finance chiefs said.

The Group of Seven in its closely scrutinized final communique said it welcomed steps by China to increase the flexibility of its currency, the yuan.

But it added: “In view of its rising current account surplus and domestic inflation we stress its need to allow an accelerated appreciation of its effective exchange rate.”

The United States and several of its trading partners have repeatedly urged China to adopt a more flexible currency regime, contending that the Chinese yuan is being held artifically low and thereby giving Chinese exports an unfair advantage on world markets.

Earlier in the day the deputy governor of the Chinese central bank, Wu Xiaoling, insisted that Beijing was indeed moving to reform its exchange rate mechanism.

“Moving the exchange rates in the absence of economic restructuring policies will hurt China,” Wu told a forum at the Peterson Institute of International Economics.

“Since China is one of the driving forces of the global economy, this will accordingly hurt the global economy. Therefore China’s authorities decided to reform the foreign exchange regime in a controlled manner on its own initiative and in a gradual fashion.”

China in 2005 ended the fixed peg of the yuan to the dollar by allowing it to float within a relatively narrow range but the move has failed to stem pressure from US and European officials for faster action.

The ministers made no mention in their final statement of the steadily eroding dollar, notably against the euro.

The greenback on Friday plunged to an historic low as they euro rose to a record 1.4301 dollars, largely on fears for the continued good health of the US economy in the face of surging oil prices.

But Paulson, repeating Washington’s oft-stated conviction, declared: “I believe a strong dollar is in our nation’s interest.”