IMF Says the Dollar Is Still Overvalued
The euro has not risen to an uncomfortably high level and the dollar is still overvalued, particularly against Asian currencies, Michael Deppler, head of the IMF's European Department, told Reuters on Monday.
The euro rose to a record high above $1.47 last week and has gained more than 10 percent against the dollar since the start of the year.
But Deppler noted that, on an effective exchange rate, the euro had risen little more than two percent since the start of 2005 and remained "within a range" close to its historical average.
"The euro is not at an uncomfortable level," Deppler said in an interview. "The current account is roughly balanced and exports are doing relatively well."
The dollar's decline has accelerated since the IMF's annual meeting in mid-October but Deppler said the Fund remained of the view that the U.S. currency was overvalued on a broad basis.
"You have to say overvalued against what," he added. "We're not talking about the pound, the euro or the Canadian dollar. But clearly, the U.S. current account deficit remains around 5 percent of GDP. In our view, there's a need for a correction in this deficit over time."
The IMF's sanguine view on recent currency moves contrasts with that of many European politicians who are growing increasingly worried about the region's export competitiveness.
Eurogroup Chairman Jean-Claude Juncker cautioned against excessive foreign exchange volatility on Monday and said ECB President Jean-Claude Trichet had been right last week to describe recent moves as "brutal."
Deppler, however, said there were reasons to be sanguine about recent foreign exchange moves and there was little sign the euro's recent climb was hurting the economy.