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Harry Schultz commentary at CBSMarketWatch

Section: Daily Dispatches

Who says they aren't doing it already?
And do you think they announce it to
everyone at the same time, or to certain
financial houses first?

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IMF says concerted action needed
if dollar continues rapid decline

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Wednesday May 28, 2003

FRANKFURT (AFP) -- A further rapid decline in the dollar
would require concerted action from governments and
central banks, the managing director of the International
Monetary Fund Horst Koehler said in a newspaper

The dollar has lost around 30 percent of its value against
the euro within the past year and Koehler told the business
daily Handelsblatt such a development was no surprise
given the United States' huge current account deficit.

quot;On a trade-weighted basis, the depreciation is around
16 percent. That's still within limits and should come as
no surprise given the huge current account deficit of the
United States,quot; Koehler said. quot;But there comes a point
when a further rapid decline in the dollar would demand
that a number of governments and central banks should
come together. However, I don't want to speculate about
this point publicly,quot; he added.

The euro soared to an all-time high of 1.1933 dollars on
Tuesday, a rise of around 45 percent from the historic
lows it ploughed to in October 2000. And experts believe
the single currency is set to rise still further.

The IMF chief was cautiously optimistic regarding the
outlook for global growth this year. He was the fund was
sticking to its forecast for global growth of 3.2 percent in
2003 quot;and of a gradual recovery in the world economy
in the second half of the year.quot;

Momentum was most likely to come from a gradual
recovery in the U.S. economy,quot; he said. quot;And we're
also counting on continued robust growth in Asia,
despite Japan and SARS. Thanks to the pleasing
development in Brazil, Latin America is at a positive
turning point. But I must concede, there is still no
determining factor for strong growth momentum in
the global economy,quot; Koehler said.

Koehler said that with the U.S. economy expected to
grow only sluggishly in the next few months, it was up
to Europe and Japan to pull their weight as well. In the
euro zone in particular, quot;product and labour markets
must be liberalised much more. Europeans are paying
for their political indecisiveness about how to unleash
dynamic market forces with shortfalls in growth.quot;

Asked whether the European Central Bank should cut
its key rates to help spur growth, Koehler replied: quot;Yes.quot;