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The IMF praises the euro, yuan and yen and criticizes the undervalued dollar


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The IMF praises the euro, yuan and yen and criticizes the undervalued dollar

29-07-2017 12:00 PM
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Baghdad News -

WASHINGTON (Reuters) - 

The US dollar is overvalued by 10 to 20 percent on the fundamentals of the US economy in the short term, while the euro, the Japanese yen and the yuan are broadly in line with the fundamentals, the International Monetary Fund said on Friday.


The external sector report of the IMF, an annual assessment of currencies, surpluses and external deficits in major economies, showed that the current external account deficit was more concentrated in certain advanced economies such as the United States, while surpluses persisted in China and Germany.


While the report said the value of the euro was appropriate for the entire European currency, he said the real exchange rate was also 10 to 20 percent lower than the German economy's fundamentals, with the large current account surplus.


At the same time, the IMF considered the value of the pound as over 15 percent as compared to the fundamentals, which include a high level of uncertainty about Britain's trade relationship with the EU after the break-up.


The IMF said the dollar's appreciation in recent years was based on relatively stronger expectations of growth and variability in monetary policy between the euro zone and Japan, as well as expectations of more financial stimulus from the administration of US President Donald Trump.


The IMF recommended that the US authorities adopt steps to reduce the current account deficit, which is still very large by reducing the federal budget deficit and implementing structural reforms to increase the rate of savings and improve the productivity of the economy.


China's current account surplus is growing again after falling in 2015 and 2016 and needs to fall, the report said.


The report found that the IMF considers the value of both the Mexican currency (peso) and the South Korean currency (wun) to be less than 5 to 15 percent lower than the economic fundamentals of the two countries.


The IMF said it expected the Mexican peso to rise as risks of US protectionist policies dissipated, but noted that South Korea needed to stimulate domestic demand to reduce a huge current account surplus.

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