Relationships Among Major Currencies, Not An Impediment To Recovery, IMF

The current exchange rates for the major currencies are not affecting the recovery of the global economy, according to International Monetary Fund (IMF) First Deputy Managing Director John Lipsky, who anticipates moderate recovery in 2010.

"In the near term, the currency relationships among the major trading currencies are not an impediment to recovery at this time," Lipsky said in an interview on CNBC. However, his remarks contrast with concerns expressed by authorities of several countries from Canada to France that the depreciation of the USD against their currencies was creating a negative impact on their exports.

European Central Bank (ECB) President Jean-Claude Trichet a few days ago warned about "excessive volatility" in foreign exchange rates. The Bank of Canada yesterday issued a new warning about the appreciation of the CAD.

Over time, currencies may contribute to a necessary shift in growth sources as "surplus countries that have been relatively focused on external demand have to shift to internal demand and the deficit countries, the opposite," Lipsky said. However, he warned about the "real danger" that countries may renew efforts to accumulate foreign currency reserves and thus hinder global recovery.

• EUR gains 20% on USD in eight months

The European currency has gained nearly 20 per cent on the USD since February, making European exports more expensive to overseas importers and thus threatening the recovery of the continental economies, facing the most severe recession since WWII.

ECB President Jean-Claude Trichet believes that the excessive volatility in foreign exchange rates is having a negative impact on economic development.

In turn, Luxembourgian Finance Minister Jean-Claude Juncker noted that exchange rate volatility "is a problem that concerns us."

Nevertheless, IMF official John Lipsky is confident that "the worst is passed" for the global economy, which has managed to start "a healing process."