IMF head takes currency war threat very seriously

October 7, 2010

, PARIS, Oct 7 – International Monetary Fund head Dominique Strauss-Kahn said on Thursday that he took the threat of a currency war "very seriously" and would do all he could to prevent one, in an interview with Le Monde newspaper.

"I take very seriously the threat of a currency war, even if it just a latent (threat)," Strauss-Kahn told the daily just ahead of the annual IMF meeting in Washington which opens on Friday.

"We have to prevent it; the IMF will put forward proposals to that end," he added.

The IMF director general said that countries might be tempted to opt for national, rather than international solutions to problems facing them in the economic recovery, especially in terms of the value of their currencies.

"We have seen that with the (recent) Japanese intervention to push down the yen, with Brazil\’s actions faced with the rise in the real," Strauss-Kahn said.

His comments come against a background of mounting concern that countries seeing their economies slow will try to devalue their currencies in order to give their exports a boost.

A competitive series of undercutting devaluations could mean a repeat of the \’beggar-thy-neighbour\’ policies of the 1930s which made the Great Depression so devastating.

A key bone of contention is China, which the United States and Europe say keeps its currency deliberately undervalued to bolster its exports at their expense.

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