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Us Treasury Chief Timothy Geithner Says America Will Not Engage In Dollar Devaluation

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"It is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity, to [be] competitive," he said. "It is not a viable, feasible strategy."

The dollar strengthened against a basket of currencies after his comments to business leader in California's Silicon Valley on Monday, including the yen, euro and sterling.

This is the first time since February that Mr Geithner - who helped create the "strong dollar mantra" in the 1990s - has broken his silence on the weakening US currency.

It also comes ahead of this weekend's meeting of finance leaders from the Group of 20 wealthy and emerging nations in South Korea, which is expected to be overshadowed by a dispute between China and the US over the valuation of the yuan and growing fears of protectionist currency wars.

The weak dollar has already led export-focused Japan to launch an unsuccessful intervention to strengthen the yen, while Brazil has warned that an "international currency war" was hurting his country's competitiveness - a weak dollar causes more funds to flow into Brazil and other emerging market economies, pushing up currencies.

The dollar has fallen 7pc since late August when Fed chairman Ben Bernanke hinted at the possibility of fresh stimulus to stoke the world's largest economy.

Answering audience questions before the Commonwealth Club of California in Palo Alto, he said the US needed to "work hard to preserve confidence in the strong dollar."

On Friday, the dollar index hit a 10-month low against a basket of major currencies, while the greenback has been plumbing fresh 15-year lows against Japan's yen.

Brazil on Monday moved to cool a strong rally in its currency by raising taxes for foreigners buying local bonds and trading in foreign exchange derivatives.

Excellent so he makes this statement just before Bernanke floods the world with toilet paper which has dollar bills printed on them.

It would appear double think is being taken to whole new levels here.

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In an interview with the newspaper, Mr Geithner also emphasized that the United States was not pursuing a deliberate policy of devaluing the dollar.

This echoed comments he made on Monday in Palo Alto, California, saying "No country around the world can devalue its way to prosperity."

In the Journal interview, he referred to three groups of currencies. In one, he put countries with currencies "undervalued by any measure" and in the second he put emerging economies with flexible exchange rates that intervene or impose taxes to try to reduce risks.

"In the third group, he put "the major currencies, which are roughly in alignment now," a suggestion that he sees no need for the dollar to sink more than it already has against the euro and yen," the newspaper reported.

Mr Geithner said he wants the Group of 20 advanced and emerging economies to agree at meetings in South Korea this weekend to move toward "norms" on exchange rate policies and numerical limits for "sustainable" trade surpluses and deficits.

"Right now, there is no established sense of what's fair," he told the newspaper ahead of G20 finance leader meetings starting on Friday in Gyeongju.

"We would like countries to move toward a set of norms on exchange rate policy," he said.

That's it Timmy just keep repeating it.

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Meanwhile back in the real world:


Is this a currency war or what?

Fast-growing nations like Thailand are trying to devalue their exchange rates to bolster their export-driven economies.

In Washington, where “strong dollar” has been the mantra for years, policy makers are taking steps that could make the already weak dollar weaker still.

European policy makers worry that a resurgent euro will threaten growth in their own backyard. And the entire world, it seems, is jawboning China to level the playing field and let its undervalued currency, the renminbi, appreciate. It is a step that Beijing, by all accounts, does not want to take.

With so many economies struggling, it suddenly seems as if it is every nation for itself in the currency markets. Policy makers the world over are worried that economic rivals are trying to turn exchange rates to their advantage, and considering how they should respond to preserve jobs and growth at home.

Even as Washington chides Beijing over the renminbi, critics accuse the United States and other rich nations of waging an international currency war that harks to the protectionist policies of the 1930s, when nations looked out for themselves rather than working together.

“Today, there is a risk that the single chorus that tamed the financial crisis will dissolve into a cacophony of discordant voices, as countries increasingly go it alone,” Dominique Strauss-Kahn, managing director of the International Monetary Fund, said during a speech in Shanghai this week. “This,” he said, “will surely make everybody worse off.”

The abrupt decline in the dollar — by about 10 percent since early June against major currencies — is upsetting the delicate balance of world economies still recovering from the shocks of the financial crisis.

So everything is roughly aligned is it?

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