FT: IMF Chief Warns on Exchange Rate Wars

Governments are risking a currency war if they try to use exchange rates to solve domestic problems, the head of the International Monetary Fund has warned, the FT reports. The comments by Dominique Strauss-Kahn came before the yen fell as a result of the Bank of Japan shifting towards quantitative monetary easing, cutting its key interest rate and proposing a new fund to buy government bonds and other assets. “There is clearly the idea beginning to circulate that currencies can be used as a policy weapon,” Mr Strauss-Kahn told the Financial Times on Monday. “Translated into action, such an idea would represent a very serious risk to the global recovery . . . Any such approach would have a negative and very damaging longer-run impact.”