IMF boss warns governments against using currency as weapon

IMF Director General Dominique Strauss-Kahn has urged governments in a newly published interview not to use their currency’s exchange rate as a weapon amid tough economic times.

“There is clearly the idea beginning to circulate that currencies can be used as a policy weapon,” Strauss-Kahn told the Financial Times.

“Translated into action, such an idea would represent a very serious risk to the global recovery . . . Any such approach would have a negative and very damaging longer-run impact,” he warned.

Following remarks by Brazilian Finance Minister Guido Mantega about the potential for a currency “war,” the IMF chief said “we have seen reports that some emerging countries whose economies face big capital inflows are saying that maybe it is time to use their currencies to try to gain an advantage, particularly on the trade side.

“I don?t think that is a good solution.”

Strauss-Kahn’s remarks came ahead of annual meetings of the IMF and World Bank in Washington at the weekend.
Source: AFP