Re: IMF steps up pressure for dollar depreciation

[Jim Devine <jdevine03@xxxxxxxxx>]

if the dollar depreciates, but the yuan stays (relatively) fixed to
the dollar, doesn't that mean yuan devaluation relative to all other
currencies not fixed to the dollar?

On 4/19/06, Alejandro Valle Baeza <valle@xxxxxxxxxxxxxxxx> wrote:
> IMF steps up pressure for dollar depreciation
> By Krishna Guha and Scheherazade Daneshkhu
> Finacial Times Published: April 19 2006 13:58 | Last updated: April 19
> 2006 21:32
>
> The International Monetary Fund on Wednesday stepped up the pressure for
> far-reaching shifts in exchange rates, declaring that the dollar will
> have to depreciate "significantly" over the medium term if global
> economic imbalances are to be resolved in an orderly fashion.
>
> In its clearest statement to date on this highly-charged subject, the
> IMF said it was essential that currencies in Asia and of oil exporters
> were allowed to appreciate as part of the required "realignment of
> exchange rates". But it shied away from giving any specific figures as
> to the extent of appreciation required.
>
> The statement came in the IMF's twice-yearly World Economic Outlook,
> published on Wednesday, which highlighted global imbalances as the
> biggest threat to what was otherwise an "unusually favourable" economic
> environment.
>
> It said global growth had been surprisingly robust in late 2005 and
> raised its estimates from September for 2006 and 2007 by 0.6 percentage
> points and 0.3 points to 4.9 per cent and 4.7 per cent respectively.
> This year is set to be the fourth in a row in which global growth has
> exceeded 4 per cent.
>
> The IMF sharply increased its estimates for growth in Japan, to 2.8 per
> cent this year and 2.1 per cent next, declaring that the expansion there
> is now "well-established". It also raised its forecasts for China and
> India significantly, with other increases for oil exporters.
>
> But the IMF remained sceptical on the strength of the rebound in the
> eurozone, inching its growth forecast up to 2 per cent this year, but
> down to 1.9 per cent next. It said growth remained heavily reliant on
> exports, with domestic consumption particularly weak in Germany.
>
> The IMF now sees the US growing at 3.4 per cent this year and 3.3 per
> cent next, a little faster this year and slower next than earlier
> estimates. It cautioned that a flattening out in US house prices could
> have a bigger effect on consumption than some studies show.
>
> It expects the UK economy to recover to 2.5 per cent growth this year,
> followed by 2.7 per cent in 2007.
>
> In keeping with the stronger pace of expected global growth, the IMF now
> expects consumer price inflation in industrialised economies to remain
> at 2.3 per cent this year and ease back only to 2.1 per cent next. It
> correspondingly revised up its estimates of short term market interest
> rates over the next two years.
>
> The IMF said global financial market conditions "remain very favourable,
> characterised by unusually low risk premiums and volatility". It argued
> that a flattening yield curve need not signal a slowdown ahead, though
> increased investment - and therefore lower corporate savings - could
> push up long term interest rates.
>
> The IMF said this year could prove a "watershed year" in which countries
> either capitalised on benign circumstances to address global imbalances,
> or spurned the opportunity. Exchange rate shifts would have to be
> accompanied by rebalancing of demand across the world, with steps to
> increase savings in the US, raise consumption in China, investment in
> the rest of Asia and boost productivity growth in the non-tradeable
> goods sectors in Europe and Japan.
>
> The World Economic Outlook also cautioned against becoming complacent
> about high oil prices. It said consumers may still be treating current
> increases as temporary, rather than permanent losses. With excess
> capacity low, the market is vulnerable to shocks.
>
> Moreover, it said recent price increases had been driven not by a
> surprising strength of demand for oil, but deepening fears about both
> short- and long-term supply.
>


--
Jim Devine / "There can be no real individual freedom in the presence
of economic insecurity." -- Chester Bowles