The head of the International Monetary Fund (IMF) Christine Lagarde strongly dismissed concerns over a so-called currency war on the sidelines of the Group of 20 nations (G-20) meeting of finance ministers and central bankers in Moscow.
"There's been lots of talk of currency wars, and we have not seen any such thing as a currency war. We've heard currency worries, not currency wars," said Lagarde. "We've not seen confrontation but deliberation, dialogue, discussions and clearly this G-20 meeting has been extremely helpful and productive."
Lagarde's comments echoed those of the G-20 nations on Saturday, who declared that there would be no currency war. This has taken the heat off Japan, which has been criticized for its expansive policies that have driven down the yen following the election of Prime Minister Shinzo Abe.
(Read More: G-20 Defuses 'Currency War,' Japan Off the Hook)
While agreeing not to enter into any competitive devaluation of their currencies, the G-20 expressed concerns over fiscal imbalances in major economies and Lagarde responded to these worries by calling for specific medium term goals to be set in both the U.S. and Japan. These goals are necessary to eliminate the dangers associated with uncertainty, she said acknowledging political divisions could prove a barrier to fixing long-term fiscal plans.
"There is a clear understanding on the part of the U.S. and Japanese authorities that the fiscal agenda is critical," she said.
"What I mean by 'fiscal agenda' is a medium term goal, which has to be identified, and also supported broadly in those countries. It has to be specific and detailed enough to eliminate as much as possible the uncertainty that goes with a lack of agenda," she added.
The U.S. government avoided the much anticipated "fiscal cliff " - a combination of tax hikes and spending cuts - by passing the American Taxpayer Relief Act of 2012. However, the government still faces the long-term challenge of managing its $16 trillion deficit, amid strong political divisions, while attempting to return to economic growth.
Meanwhile Japan's government is also burdened with trying to cut its $77 billion trade deficit while simultaneously trying to drag its economy out of a decade long period of weak economic growth and political gridlock.
(Read More: Japan Finance Minister Relieved G-20 Heat Is Off)
Lagarde also warned that policies intended to reduce deficits or fiscal consolidation needed to be country specific and administered at the correct pace.
"There has to be fiscal consolidation and it has to be at the right pace and it has got to be country-specific. It often has to go hand in hand with monetary policy, and we've seen quite accommodative monetary policy in order to support and help fiscal consolidation efforts.
"They can't be a substitute for each other, they have to go in parallel, and that's what we hope to see with the missing element, which is the medium term anchoring that is needed in both countries," she added.
Amid talk of currency wars, some countries have voiced concerns about the impact of currency manipulation on emerging economies' capital flows – the investment flows in and out of countries.
Officials in both South Korea and India, for example, have publicly spoken out about their concerns about capital flows.
Bank of Korea Governor Kim Choong-soo told the Wall Street Journal on Sunday that he was concerned over the weakening yen's impact on his country's economy. The governor stressed the importance of strengthening financial safety nets to give smaller nations the confidence to not have to stockpile currency reserves.
(Read More: South Korea warns it may tighten capital flow controls)
The Reserve Bank of India Governor Duvvuri Subbarao told CNBC on Saturday that he was concerned about exchange rate movements and their impact on capital flows.
The IMF has been finalizing its guidelines for capital flows, Lagarde confirmed.
"Capital flows come and go depending on many factors and there are quite a few drivers of this. We've slightly amended our guidelines to take into account both the currency rate and the current account balances and determine whether there's enough consistency and fair value," she said.
The IMF is set to publish an external sector report in 2013, which would compare imbalances in various currencies around the world, following Lagarde's announcement in December that the IMF should act as a referee to control capital flows, rather than having countries unilaterally impose restrictions.