Re: [OPE-L] IMF warns of abrupt dollar fall

From: Paul Cockshott (wpc@DCS.GLA.AC.UK)
Date: Wed Oct 31 2007 - 17:12:08 EDT

Dollar seems to be in rapid decline now, BBC reports that a dollar has
fallen to 46 pence today.

Not as low as it was in the 60s but heading that way.


From: OPE-L [mailto:OPE-L@SUS.CSUCHICO.EDU] On Behalf Of Alejandro Valle
Sent: 31 October 2007 19:34
Subject: [OPE-L] IMF warns of abrupt dollar fall


IMF warns of abrupt dollar fall
By Eoin Callan in Washington 


Financial Times published: October 22 2007 20:03 | Last updated: October
22 2007 20:03


The dollar hit a record low against the euro on Monday as Rodrigo Rato,
managing director of 


the International Monetary Fund warned that the US currency could suffer
a dramatic fall 


that would shake confidence in American assets. 


The outgoing IMF managing director said the depreciation of the dollar
had been orderly, but 


cautioned there was a risk of a runaway sell-off that would hit growth
in major economies.


The risks of a disorderly fall in the US currency appeared to increase
over the weekend 


after the IMF failed to agree internal reforms that would have set the
stage for it to take 


on a greater role managing global economic imbalances.


"Up to now, movements in exchange rates have been orderly and in line
with fundamentals. But 


there are risks that an abrupt fall in the dollar could either be
triggered by, or itself 


trigger, a loss of confidence in dollar assets," Mr Rato said. 


Hank Paulson, US Treasury secretary, said the IMF needed to press on
with efforts to make 


its surveillance of member country exchange rate policies more
effective, adding it was a 


"defining issue" for the fund.


"IMF staff need to roll up their sleeves, undertake thorough analysis
and put forward their 


judgments. Without meaningful exchange rate surveillance, governance and
management, reform 


will ring hollow," he said.


Mr Paulson joined finance ministers from the Group of Seven most
advanced economies at the 


weekend in urging China to let its renminbi appreciate more rapidly.


Some policymakers also expressed concern that the fall in the value of
the US dollar was 


being disproportionately absorbed by currencies such as the euro and
Canadian dollar, rather 


than Asian currencies, including the renminbi. 


Mr Rato warned that this trend could hamper growth and fuel support for
populist economic 


policies in these countries, adding that the global economy could be at
an "inflection 




He said there was "a risk that exchange rate appreciation in countries
with flexible 


exchange rates - including the euro area - could hurt their growth
prospects, and that in 


these circumstances protectionist pressures could worsen". 


The managing director called for governments to implement policy actions
in order to reduce 


global current account imbalances and not rely on exchange rates to
achieve the adjustment. 


But the fund suffered a setback to its efforts to facilitate such
understandings between 


governments after members failed to agree a formula to give more say in
the IMF to 


fast-growing economies. 


The dollar hit a record low of $1.4348 against the euro, before climbing
slightly, while 


sterling also rose as high as $2.0537 against the US currency. Japan's
yen hit a six-week 


high of Y113.27 against the dollar. 

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