IMF managing director Dominique Strauss-Kahn warned the international community Thursday that cooperation at a global economic level is “decreasing” amid the risky business of so-called currency wars.
He quantified the statement by saying it was “not vanishing” but that decreasing levels should be a cause for concern. He stated that the currency situation at present threatened everyone, because “there’s no domestic or national solution to [a] global problem.” He further added that considering a county’s currency as a ‘weapon’ or even a policy tool was an extremely negative thing for the global economy. “That’s certainly not for the good of the global economy,” he said of currency wars to reporters Thursday morning.
This comes a day after Treasury Secretary Timothy Geithner all but blamed China for fuelling the currency wars. “When large economies with undervalued exchange rates act to keep the currency from appreciating, that encourages other countries to do the same, and this sets off a dangerous dynamic,” Geithner commented in Washington Wednesday. The US has been pressing China to make the yuan’s exchange rate more flexible, but will little result.
China has also come under fire at the recent EU-Asia summit, where officials in Brussels also asked Chinese delegates to consider unpegging the yuan and allowing it to appreciate in the market. The fear is that the competition between foreign exchange policies will hamstring economic recovery at a global level.
Finance ministers of the G7 are set to meet in Washington Friday to discuss matters of the economy, with currency rates high on the talking list.
