IMF changes rules of the currency game, as US imbalances worsen

WASHINGTON, June 19, 2007 (AFP) – The International Monetary Fund has launched a new surveillance system on exchange-rate policies aimed at preventing a country from jeopardizing the health of the global economy. The IMF said the major reform updates a 30-year-old program and targets currency manipulation that could destabilize trade and private capital flows.

However, IMF officials sidestepped questions about China, criticized for keeping its yuan currency undervalued in order to gain a competitive edge in exports.

The new legal framework for monitoring a country’s program does not target any specific country, but provides a level playing field for all its 185 members by being clearer and broader in scope, IMF officials insisted.

“It reaffirms that surveillance should be focused on our core mandate, namely promoting countries’ external stability,” IMF managing director Rodrigo Rato said Monday, according to the prepared text of a speech he delivered in Montreal, Canada.

“And it gives clear guidance to our members on how they should run their exchange-rate policies, on what is acceptable to the international community, and what is not.”

Perhaps the most delicate issue of exchange-rate pol