Tagged: Currency war

IMF chief’s warning of currency war ‘real threat’

BBC News | 7 October 2010 | 23:33 GMT

Global currency wars pose "a real threat" to economic recovery, the head of the International Monetary Fund, Dominique Strauss-Kahn, has warned. In an interview with the BBC, he said currency disputes showed that countries were not co-operating as well as they had during the financial crisis. In recent weeks both the US and Europe have led criticism of China over its undervalued yuan.

Dominique-Strauss-KahnMeanwhile, Japan has been forced to intervene to curb rises in the yen. Separately, Indian Finance Minister Pranab Mukherjee on Thursday warned that imbalances in the global economy have become "not sustainable". But he urged major economies to shun confrontation to avoid a feared currency war.

Mr Strauss-Kahn told the BBC that there were signs that countries were trying to use their currencies "as a weapon". "The willingness of the countries to work together, which was very strong at the climax of the [financial] crisis is not as strong today," he said. "’Currency war’ might be too strong, but the fact the countries want to find domestic solutions to a global problem is really a threat to the recovery."

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Asians Gird for Bubble Threat, Criticize Fed Move

Bloomberg | November 04, 2010 | 6:08 AM EDT

Asia-Pacific officials are preparing for stronger currencies and asset-price inflation as they blamed the U.S. Federal Reserve’s expanded monetary stimulus for threatening to escalate an inflow of capital into the region.

Chinese central bank adviser Xia Bin said Fed quantitative easing is “uncontrolled” money printing, and Japan’s Prime Minister Naoto Kan cited the U.S. pursuing a “weak-dollar policy.” The Hong Kong Monetary Authority warned the city’s property prices could surge and Malaysia’s central bank chief said nations are prepared to act jointly on capital flows. “Extra liquidity due to quantitative easing will spill into Asian markets,” said Patrick Bennett, a Hong Kong-based strategist at Standard Bank Group Ltd. “It will put increased pressure on all currencies to appreciate, the yuan in particular has been appreciating at a slower rate than others.”

The International Monetary Fund last month urged Asia- Pacific nations to withdraw policy stimulus to head off asset- price pressures, as their world-leading economies draw capital because of low interest rates in the U.S. and other advanced countries. Today’s reactions of regional policy makers reflect the international ramifications of the Fed’s decision yesterday to inject $600 billion into the U.S. economy.

Stocks Climb

Most Asian currencies rose against the dollar after the Fed’s move, led by a 0.5 percent climb in the Taiwanese dollar and 0.2 percent gain in the South Korean won. New Zealand’s currency reached a 29-month high, and Australia’s dollar touched its strongest level since 1982. The MSCI Asia Pacific index of stocks advanced to the highest level since July 2008. People’s Bank of China adviser Xia said U.S. policy makers have a conflict between making policy for the domestic economy and accepting responsibilities that come with being the issuer of the international reserve currency, writing in the Finance News newspaper today.

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U.S. to delay decision in China currency dispute

Reuters | Oct 15, 2010 | 10:09pm IST

The Obama administration plans to delay a decision on whether to label China a currency manipulator, a move long demanded by many U.S. lawmakers but also a potentially big wrench in an important relationship. A Senate aide told Reuters the Treasury Department would hold off releasing its semi-annual report on the currency practices of U.S. trading partners.

It was not immediately clear how long the delay would be. Industry sources had said they expected the report to be unveiled at 1 p.m. EDT (1700 GMT) on Friday. The Senate aide, speaking on condition he not be named, said he was "hearing they will delay its release."

A desire to look tough on "unfair" trade practices before the U.S. congressional election on Nov. 2, in which Democrats are battling to keep control of Congress, could tempt President Barack Obama to cite China for the first time in 16 years.

But concern about angering the largest holder of U.S. government debt and the need for Chinese support on a host of international issues could mean continuing diplomatic efforts that have resulted in a nearly 2.5 percent rise in the value of China’s yuan against the dollar in recent months. It is a fine line and many observers think Obama will opt to play it safe with Beijing and give it another pass.

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