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U.S. Treasury Secretary Asks IMF To Review FX Rate Polices

U.S. Treasury Secretary Steven Mnuchin has asked the International Monetary Fund (IMF) to carry out a thorough and frank appraisal of the exchange rate policies of its member countries.

According to Treasury spokesman, Mnuchin discussed the priorities of the new U.S. administration led by Donald Trump with IMF Managing Director Christine Lagarde in a phone call earlier this week.

This is among the first interactions between the Trump administration and the IMF.

In a statement the Treasury Department said,

[Mnuchin] underscored his expectation that the IMF provide frank and candid analysis of the exchange-rate policies of IMF member countries.

Trump repeatedly accused China during his presidential campaign of manipulating its currency rate to ensure a trade advantage over the U.S. He had threatened trade sanctions on countries having an unfair advantage through an undervalued exchange rate.

CNBC

The IMF carries out a review of the economic policies and exchange rates of 189 member countries annually and provides recommendations based on it. In its last review the IMF had said that Germany’s currency was undervalued by around 10-20 percent while China’s currency was largely in line with its fundamentals.

In his call, Mnuchin is said to have highlighted the importance placed by the Trump administration on job creation and economic growth in United States. He also reiterated that Washington looked forward to advice from the IMF on economic policies related to its member countries and correcting the global imbalances.

Also as a part of the conversation Mnuchin stated that the new US administration will make sure that U.S. resources provided to institutions such as the IMF are used as much as possible to promote U.S. interests. With a 17-percent share in the fund’s voting power, Washington is the largest shareholder of the IMF giving it substantial leverage over major decisions.

Mnuchin’s discussion with Lagarde comes after Peter Navarroa, a key Trump advisor on issues of trade alleged that Germany was continuing to exploit its trade partners by having an undervalued currency. The previous U.S. administration has also stated that IMF needs to be more vocal in issues related to exchange rates even if it makes it unpopular with governments.

The protectionist agenda of the Trump administration has spread alarm worldwide. Recently officials from G20 countries voiced their concerns relating to how the United States would deal with global multilateral institutions and cooperate on key issues like foreign exchange, trade relations and economic policies.


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