Mediafax (Mediafax)
Currencies  |  October 02, 2010 13:53:47

Among experts there is increasing concern that some countries will devalue its currency


Mediafax

NEW YORK (MEDIAFAX) - Concerns about the fact that some countries will begin to strengthen their own exports to devalue its currency, will be one of the most important upcoming meeting of the International Monetary Fund (IMF), which is to take place next week in Washington. Informed the Reuters on Saturday.

Questions exchange rates are very sensitive issue, because on the one hand courses can help regain balance in the global economy, but on the other hand, may very well be used as an instrument of competition among individual states.

With the weakening dollar, which lost value due to expectations of further monetary easing in the United States are growing fears that some countries, particularly developing ones, can resort to devaluing their currencies. It is inserted into them means many investors because of exchange-rate those above them bring higher profits.

Developed economies could benefit from a weakening of their currencies to support exports and thus the entire economy. The developing countries but do not want to pay the bill for the economic crisis that began just in developed countries, and are looking for a way to keep their goods competitive on the world market.

"We can not simply allow our economy was not in equilibrium, while the rest of the economy, yes," said Brazil's central bank president Henrique Meirelles. Some countries, according to him "trying to protect themselves by weakening their own currencies."

Already earlier this week warned the Brazilian Finance Minister Guido Mantega, that the world was in "international currency war," because some governments are trying to manipulate the exchange rates of their currencies in order to promote their own exports.

Financial organizations around the world, including the head of the International Monetary Fund (IMF) Dominique Strauss-Kahn, however, rejected this view.

According to Canadian Finance Minister Jim Flaherty will be the topic of exchange rates of the discussions during the meeting G7 representatives. "Questions of exchange rates are a major topic in the world. They disrupt trade relations," said Flaherty. "We believe that currencies, including the Chinese, must be flexible so that their respective businesses were fair," he added.

Two weeks ago, said U.S. Treasury Secretary Timothy Geithner that at the November summit in South Korea attempts to convene a meeting of G20 to step up pressure on China on the issue of currency reform.

Beijing's monetary policy is already a hot topic in Washington. Many U.S. lawmakers believe that the undervalued yuan gives China an unfair advantage to preparing Americans for a job. In addition, the House of Representatives on Wednesday adopted a law that allows U.S. authorities to penalize China if not allow the RMB exchange rate increased.

The growing tension in the exchange rate raises the question whether the world will not need a new Plaza Accord agreement, which was a treaty between the five most powerful capitalist states in 1985, which allowed depreciation of the dollar against other major currencies.

According to Reuters, it is now clear that most world leaders would not want something like the United States afford. Countries like Brazil, South Korea and India have made it clear that you do not want to anger China, which is their main trading partner.

"We have good relations with China. We will not open this topic. Let's open another large country," said one of the central bankers, who declined to be named.

According to the Brazilian foreign minister Celso Amorim, according to which China is a "major customer" of Brazil, causing pressure on China "is not the right way to find a solution."

According to South Korean Finance Minister Yoon Jeung-hyun is also discussion about the level of the renminbi exchange rate "appropriate topic" for the G20 summit.

Many leaders of the G20 countries will have, according to Reuters, more interested in discussing the weakening of the dollar recently. The U.S. currency is losing more than five percent against a basket of major world currencies. Investors leaving the dollar in the expectation that the Federal Reserve (Fed) released more monetary policy to support growth of the U.S. economy, and instead shifted their funds in currencies of emerging countries that bring them higher returns.

David Vandrovec, vandrovec@mediafax.cz

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