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Finance  |  October 08, 2010 04:40:05

Meetings of the IMF and WB will mainly address the question of exchange rates


Mediafax

WASHINGTON (MEDIAFAX) - Meetings of the International Monetary Fund (IMF) and World Bank (WB), which begins on Friday in Washington, mainly to address issues of currency. Experts fear that some countries will begin to strengthen their own exports to devalue its currency.

According to IMF chief Dominique Strauss-Kahn currency threatens war if the States to use exchange rates to solve domestic problems. "It extends the idea that currency can be used as a political weapon," said Strauss-Kahn told the Financial Times. This comment preceded the Japanese central bank to ease monetary policy, which led to a decline in the Japanese yen.

"Such a concept would involve a very serious threat to global recovery," says the head of the IMF. "Any similar approach should in the long term very negative and damaging impact," he added.

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 these more extended exchange bring them higher profits.

Developed economies could benefit from a weakening of their currencies to promote 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."

Early last 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.

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.House of Representatives also passed 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 to the situation."

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 moved their money into currencies of emerging countries that bring them higher returns.

David Vandrovec, Simon Radačičová, vandrovec@mediafax.cz

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