IMF says dollar ‘overvalued’

[marmar]

from The Financial Times:



IMF says dollar ‘overvalued’
By Chris Giles in London

Published: October 17 2007 14:00 | Last updated: October 17 2007 14:00

Currency traders were given a green light to continue selling the US dollar on Wednesday, as the International Monetary Fund said the greenback “remains overvalued” and rejected claims the euro had risen too far.

Contradicting Rodrigo Rato, the outgoing IMF managing director, who last week said “right now the dollar is undervalued”, the fund’s staff conclude the dollar is still too high. The multilateral lender also forecast slower growth in 2008 at 4.75 per cent, compared with 5.2 per cent expected this year.

The IMF’s new stance on the dollar will counter the arguments to the contrary made by France and some other eurozone members at this weekend’s meetings of the Group of Seven leading economies and the IMF’s governing body. They have been urging a change in language to temper the fall in the dollar, which dropped by more than 4 per cent against the euro in September alone.

The IMF, however, has little sympathy for struggling eurozone exporters hit by the currency’s rise. It says that even after its recent rise, the euro “continues to trade in a range broadly consistent with medium-term fundamentals”.

Apart from the dollar, the IMF’s economists also think sterling is overvalued, while the Japanese yen and the Chinese renmimbi remain too cheap compared with other currencies.

In some of its strongest language to date, the fund’s officials call on China to let its currency appreciate. Repeating its demand for “greater flexibility” of China’s managed currency, the IMF added that such action was in China’s best interests.

“Further upward flexibility of the renminbi, along with measures to reform the exchange rate regime and boost consumption, would also contribute to a necessary rebalancing of demand and to an orderly unwinding of global imbalances,” the World Economic Outlook argued. .....(more)

The complete piece is at: http://www.ft.com/cms/s/0/e87f070e-7c96-11dc-aee2-0000779fd2ac.html?nclick_check=1

[Richard Steele]

1. At its lowest point in over 30 years, and still "overvalued". Heckofa job, Georgie! nm

[AlCzervik]

2. next stop for the dollar--peso.

[Vilis Veritas]

11. But what about the Amero?

edited for better pic...and to add that i mean this in jest. ;-)

[hunter]

13. Well, Mexico and Canada still have enough oil & gas for domestic use...

And they haven't got it out for Hugo Chavez.

Explain to me, please, why they would want to be assimilated by a collapsing superpower?

[Vilis Veritas]

17. I do not uphold the view that the US is collapsing...

Changing, yes...collapsing, no. My opinion, nothing more.

I do not subscribe to fear mongering to drive my thought processes...money is illusory and means nothing...you can't collapse that which has no substance to begin with, you can only play with the fears of the masses to drive actions and markets...

Peace.

edited to add that my post about the amero was meant in jest...not anything I truly believe.

[Hydra]

3. Superpower sinking over here

this should be interesting...maybe we'll get some jobs back when paying people in other currencies gets too expensive.

[Selatius]

4. Keep on running up the debts, Bush. You're really sinking us now.

Maybe we can see the bottom of the ocean before he's through with us.

[Swamp Rat]

5. Ah, phase 2 of the New World Order.

Destroy the U.S. Dollar.

[Vilis Veritas]

12. And replace it with the Amero...

edited to add that i mean this in jest. ;-)

Oh yea, and I own a couple of these coins...just because.

[Ganja Ninja]

6. Third world here we come!

:hangover:

[Junkdrawer]

7. I maintain strongly, to this day, that exporting all your industries...

will eventually have a negative impact on your economy.

I know the "Free Traders" think this is a radical view....

[Hydra]

8. Free traders are funny

how are we supposed to buy junk we don't need on no income? Credit requires repayment at some point(due to bankruptcy "fix")

[sandnsea]

16. The new economy is for the top 40%

There are enough of them globally to make the rest of us irrelevant for at least a century. Just like Americans don't have a right to all the jobs, we will soon be told we have no more right to a house than any third world person either. When Hillary expresses shock that the "middle class" mortgage their homes to pay for their kids' college, the 60%, whose homes wouldn't cover the cost even if they were mortgaged, better pay attention. There are a few candidates who remember we exist, but so far none of them are winning.

[Romulox]

18. A strong dollar means cheap imports and promotes outsourcing.

So-called "Free trade" (i.e. massive trade deficits) is only made possible by artificially propping up the dollar. See e.g. the Chinese manipulation of the renmimbi or the Japanese manipulation of the yen.

[Uncle Joe]

9. This is the price

of being stuck between Iraq and a hard place. Either raise interest rates to support the dollar which will hurt the housing market even more or drop the rates and use a wheelbarrow for the necessary amount of money it takes to buy groceries.

[Romulox]

10. I think this is GOOD news...

Our trade deficits and outsourcing of labor are not sustainable in the long term.

And if we are honest with ourselves, cheap baubles from overseas are NOT what we are having trouble affording--it's good ol' American healthcare and housing.

[lovuian]

14. Japan is paying in Yen for oil now

its bad

[Romulox]

15. Japan has overvalued its currency vis a vis the dollar for a generation. nt

[ProfessorGAC]

19. I Don't Agree

The total capitalization of the United States is more than $25 trillion dollars with only abuot $2 trillion+ in circulation. That's a 12:1 ratio of capital to liquidity. That's one of the highest in the world.

I think this is more a function of currency trading and speculating than it is economic logic.
The Professor

[Javaman]

20. life during fiat economy. nt