Friday 8 October 2010

Currency war

FT reported that the IMF is worried about exchange rate manipulation by some countries:

Governments are risking a currency war if they try to use exchange rates to solve domestic problems, the head of the International Monetary Fund, Dominique Strauss-Kahn, has warned.

“There is clearly the idea beginning to circulate that currencies can be used as a policy weapon,” Mr Strauss-Kahn told the Financial Times on Monday.“Translated into action, such an idea would represent a very serious risk to the global recovery . . . Any such approach would have a negative and very damaging longer-run impact.”

Government bonds, stocks and gold prices all rose on the expectation that central banks of the world’s biggest economies would embark on a round of quantitative easing.

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