IMF says weaker dollar would help global growth

– Wed Feb 23, 4:21 pm ET

WASHINGTON (AFP) – The International Monetary Fund called for a weaker dollar to help the United States reduce its deficits with the rest of the world and rebalance the global economy, in a report released Wednesday.

In the report prepared for a Group of 20 finance chiefs meeting last week, the IMF said that its calculations showed the dollar remains "on the strong side" of medium-term fundamentals, while the euro and the Japanese yen were "broadly in line" and several Asian currencies, including China, were undervalued.

The widening US current account deficit -- a broad measure of trade in goods, services, income and payment -- rose a fifth straight quarter in the third quarter last year, to $127.2 billion, according to the latest US official data.

The issue of a weak dollar is particularly sensitive in Brazil, where the government has said an international "currency war" is under way with the United States pumping cheap dollars into its post-crisis economy, while China's yuan sinks in tandem.

Among the threats to global growth, the IMF highlighted "insufficient progress in developing medium-term fiscal consolidation plans, especially in the United States and Japan" and "sovereign and banking sector risks in the euro area periphery."

"In key surplus economies, overheating pressures can be alleviated by permitting currency appreciation, facilitating a healthy rebalancing from external to internal demand."