The head of the International Monetary Fund Rodrigo Rato has warned of the risk of an abrupt fall in the dollar’s exchange rate and a rapid appreciation of the euro. Addressing the annual meetings of the IMF and World Bank, Rato expressed concern that that would have negative consequences for euro zone growth.
Rato said governments need to implement agreed policy actions in order to reduce global current account imbalances and not rely on exchange rates to achieve the necessary adjustment.
The decline of the dollar has seen it go from parity with the euro in 2004 to hit record lows against a basket of major currencies at one stage on Monday, when one euro was worth $1.4327.
The former head of the Federal Reserve Alan Greenspan said in a speech at the weekend that the dollar’s slide may well reflect an increasing unwillingness among foreigners to buy US securities.