Push for currency compromise

In a speech at the International Monetary Fund annual meeting, Treasury Secretary Timothy Geithner repeated his recent call for the fund to take a more aggressive role in ensuring that exchange rates are not used by countries to gain the upper hand in trade — as China is accused of doing.

The US and other industrialised countries are pushing to create a broad set of economic targets that would hold key countries — notably China — more directly accountable for their currency and other policies.

HT Image

The idea, under discussion as financial leaders try to resolve a stubborn dispute over China's closely managed currency policy, is to expand the discussion beyond exchange rates.

Instead, countries would commit to meet other, related targets and guidelines - such as avoiding excessive accumulation of foreign reserves or running an outsize current account surplus. The current account is a basic measure of the goods, services and capital moving into and out of a country; the accumulation of reserves can signal that a country's economy or exchange rate is out of balance with its trading partners.

In a speech at the International Monetary Fund annual meeting, Treasury Secretary Timothy Geithner repeated his recent call for the fund to take a more aggressive role in ensuring that exchange rates are not used by countries to gain the upper hand in trade — as China is accused of doing. Although the fund has no power to control a country's currency policies, it could reprimand a country when it thinks it is accumulating excess foreign reserves or threatening the stability of the world economy, Geithner said.