IMF chief sees no risk of 'currency war'

International Monetary Fund chief Dominique Strauss-Kahn said on Tuesday he did not see a risk of a global "currency war" as countries intervene to weaken their currencies but acknowledged it was a concern.

The IMF managing director said efforts by countries to devalue their currencies will be discussed at meetings of the IMF in Washington on October 8-9 and the group of 20 major economies in South Korea in November.

"There has been a rising concern in recent days about this question," Strauss-Kahn said. "I don't feel today there is a big risk of currency war despite what has been written," he added.

His comments come as more governments around the world move to keep their currencies from appreciating to boost exports and improve trade balances.

Japan intervened for the first time in six years on September 15 to prevent the yen from worsening a faltering recovery. Colombia and Thailand have made similar moves.

Brazilian finance minister Guido Mantega on Monday said the world is in an "international currency war," as governments manipulate their currencies to improve their competitiveness.

Speaking in general terms, Strauss-Kahn said history had shown that such interventions do not have a lasting impact and that the IMF preferred that market forces be left to determine exchange rate values.

"The core of the question is this the kind of solution that we can provide to the global situation or not? The answer is no," he said, adding: "Clearly it is not a global solution."

Strauss-Kahn said since the world financial and economic crisis had eased, cooperation among major economies "has not been as strong as it was before." "Most countries have a tendency of going back to their problems," he said.

The IMF chief said the world recovery was "still very fragile" and the major issue for policymakers was whether growth was strong enough to reduce high unemployment.

"It will be difficult to say that the crisis is over before unemployment is decreasing," Strauss-Kahn said.           

He said the IMF leaned on the "optimistic side" when it came to the economic recovery in the United States.

He repeated that the IMF did not see the risk of a double dip recession  although noted the US recovery had clearly slowed.

The IMF releases updated forecasts for the world economy next Wednesday. Earlier on Tuesday the fund's No. 2 official, John Lipsky, said the global recovery would remain sluggish into early 2011.

Strauss-Kahn said the recovery in Europe "is not strong enough" and some countries needed tough fiscal programs "because they cannot afford to go on with the situation they're in".

"There is no fiscal austerity in Europe, but there is a need for a very reasonable fiscal path for some countries and the possibility for others to go on with withdrawal of their stimulus," he added.