NEW YORK (Forex News Now) – In an address given today, U.S. Treasury Secretary Timothy Geithner expressed concern over global currency manipulations and their effect on the global economy as a whole.
Geithner pointed to several competitive currency devaluations across the globe as a systemic risk in advance of the International Monetary Fund and World Bank semi-annual meetings this weekend.
“This is a problem because when large economies with undervalued exchange rates act to keep the currency from appreciating, that encourages outer countries to do the same,” Geithner claimed in an address given at the Brookings Institution.
He was mainly addressing his point to China, which has so far refused to allow the yuan to rise to what most believe is its fair-market value.
“China will be less likely to move to allow its currency to rise more rapidly if it is not confident other countries will move with it.”
Geithner’s comments about recent global forex news come as the United States is preparing to establish its position at the meetings this weekend as a player in the economy that is doing what it can to help restore global growth. The detrimental devaluations undertaken by other actors on the global stage, however, threaten to derail prospects of a global recovery, according to the US.
The move towards devaluation mainly comes from countries who are heavily dependent on exports. A cheaper home currency makes exports cheaper to buy, especially when compared to the dollar and the American consumer markets – currently the largest consumer market in the world for most export-centric nations.
“As America saves more, countries overly reliant on exports to us for their own growth will need to change their policies, or else global growth will slow and all of us will be worse off,” Geithner cautioned in his address.
Strategy not “viable”
Geithner further added that a strategy of devaluation is not a “viable” strategy for the home currency, nor is it a “sustainable” strategy for the country’s trading partners.
The global forex news that has spurred this policy position by the US has mainly come from China, which continues to resist a market-based exchange rate for the yuan. The resistance to allow the yuan to float on a free market basis has caused US lawmakers to propose potential tariffs on Chinese imports unless the yuan is allowed to appreciate in value.
More global forex news will emerge this weekend as the key financial and monetary policymakers of the world meet for the IMF/World Bank meetings.