IMF Chief Warns on Dollar Decline if No Debt Deal

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IMF Chief Warns on Dollar Decline if No Debt Deal

Published: Thursday, 28 Jul 2011 | 7:57 PM ET Text Size By: Reuters

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Failure by the United States to raise the debt ceiling by an Aug. 2 deadline could lead to a fall in the value of the dollar and raise "doubts" among those using it as a reserve currency, the head of the IMF said on Thursday.

"It would probably entail a decline of the dollar relative to other currencies, and probably doubts in the mind of those people who reserve currencies as to whether the dollar is effectively the ultimate and prime currency of reserve," IMF Managing Director Christine Lagarde told PBS NewsHour in an interview.

Lagarde, a former French finance minister, said it was difficult to predict what the market fallout would be if the U.S. did not reach an agreement and the country defaulted.

"There are so many counterparties that are invested in U.S. Treasury funds,

it would be very difficult and very dramatic," she added.

http://www.cnbc.com/id/43936663