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[WASHINGTON] Overreliance on currency depreciations to boost domestic economies could exacerbate global tensions over exchange rates, the head of the International Monetary Fund said on Thursday.
The sharp rise of the dollar against the euro and yen is expected to be a major theme at the meeting of the world's top economic policymakers in Washington this week. The recent currency moves have exposed some emerging economies as well.
"Excessive reliance on exchange rate depreciations to spur domestic activity could increase global currency tensions and should be avoided," IMF Managing Director Christine Lagarde said in her "Global Policy Agenda," which sums up the Fund's main advice and actions for its 188 member countries.
The IMF has said the currency shifts are helpful on the whole, as they support the struggling economies in the eurozone and Japan, but could create winners and losers.
The US Treasury last week warned Europe against relying too much on exports, which have been spurred by a weaker euro, and also took South Korea to task for currency interventions.
More than two dozen central banks have further eased monetary policy over the last few months to support their economies or counter global deflationary pressures.
According to OECD calculations, countries pursuing monetary easing in the last few months accounted for roughly half of global GDP.
Ms Lagarde said the world still does not have a good system for helping countries in times of turmoil, as evidenced by recent exchange rate fluctuations and large capital flows and reserve accumulation in some emerging markets.
While regional financing arrangements, bilateral swap lines and the IMF's own loan programs have helped, they are still not well-coordinated, Ms Lagarde said.
"The global financial safety net remains underused during periods of turbulence, with uneven access and a multilayered structure," she said.