WASHINGTON (Reuters) - The Group of 20 leading economies on Friday said risks to the global economy had diminished with improved growth prospects in rich nations, but it warned of challenges from exchange rate volatility and geopolitical tensions to low inflation.

"Risks to the global economy are more balanced since we last met," G20 finance ministers and central bankers said in a communique after a two-day meeting. "Near-term prospects in advanced economies, notably the euro area and Japan, have improved recently, while the U.S. and UK continue to record solid growth, which could support a stronger global recovery."

"Nonetheless, there are important challenges, including volatility in exchange rates and prolonged low inflation, sustained internal and external imbalances, high public debt, and geopolitical tensions," the communique said.

(Reporting by Randall Palmer; Writing by Tim Ahmann; Editing by Paul Simao)