Currency traders were given a green light to continue selling the US dollar on Wednesday, as the International Monetary Fund said the greenback "remains overvalued" and rejected claims the euro had risen too far.Contradicting Rodrigo Rato, the outgoing IMF managing director, who last week said "right now the dollar is undervalued", the fund's staff conclude the dollar is still too high. The multilateral lender also forecast slower growth in 2008 at 4.75 per cent, compared with 5.2 per cent expected this year.The IMF's new stance on the dollar will counter the arguments to the contrary made by France and some other eurozone members at this weekend's meetings of the Group of Seven leading economies and the IMF's governing body. They have been urging a change in language to temper the fall in the dollar, which dropped by more than 4 per cent against the euro in September alone.The IMF, however, has little sympathy for struggling eurozone exporters hit by the currency's rise. It says that even after its recent rise, the euro "continues to trade in a range broadly consistent with medium-term fundamentals".
Currency traders were given a green light to continue selling the US dollar on Wednesday, as the International Monetary Fund said the greenback "remains overvalued" and rejected claims the euro had risen too far.
Contradicting Rodrigo Rato, the outgoing IMF managing director, who last week said "right now the dollar is undervalued", the fund's staff conclude the dollar is still too high. The multilateral lender also forecast slower growth in 2008 at 4.75 per cent, compared with 5.2 per cent expected this year.
The IMF's new stance on the dollar will counter the arguments to the contrary made by France and some other eurozone members at this weekend's meetings of the Group of Seven leading economies and the IMF's governing body. They have been urging a change in language to temper the fall in the dollar, which dropped by more than 4 per cent against the euro in September alone.
The IMF, however, has little sympathy for struggling eurozone exporters hit by the currency's rise. It says that even after its recent rise, the euro "continues to trade in a range broadly consistent with medium-term fundamentals".
Japan and China lead flight from the dollar Japan and China led a record withdrawl of foreign funds from the United States in August, heightening fears of a fresh slide in the dollar and a spike in US bond yields. Data from the US Treasury showed outflows of $163bn (£80bn) from all forms of US investments. "These numbers are absolutely stunning," said Marc Ostwald, an economist at Insinger de Beaufort. Asian investors dumped $52bn worth of US Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries. [The US] requires $70bn a month in capital inflows to cover its current account deficit, but the key sources of finance are drying up one by one.
Japan and China led a record withdrawl of foreign funds from the United States in August, heightening fears of a fresh slide in the dollar and a spike in US bond yields.
Data from the US Treasury showed outflows of $163bn (£80bn) from all forms of US investments. "These numbers are absolutely stunning," said Marc Ostwald, an economist at Insinger de Beaufort.
Asian investors dumped $52bn worth of US Treasury bonds alone, led by Japan ($23bn), China ($14.2bn) and Taiwan ($5bn). It is the first time since 1998 that foreigners have, on balance, sold Treasuries.
[The US] requires $70bn a month in capital inflows to cover its current account deficit, but the key sources of finance are drying up one by one.
Indian regulator sparks market chaos The Indian stock exchange see-sawed spectacularly yesterday after regulators revealed plans to limit the flow of foreign money into Indian shares to avert the risk of the market overheating. The proposed controls on offshore derivative instruments caused chaos on the Mumbai Stock Exchange with the benchmark Sensex index falling nearly 10 per cent within minutes of opening before trading was suspended. Palaniappan Chidambaram, India's Finance Minister, moved quickly to dispel "alarmist" fears that foreign investment in Indian companies was unwelcome, boosting investor confidence. Most of the lost ground was made up after trading resumed with the index closing less than 2 per cent lower.
The Indian stock exchange see-sawed spectacularly yesterday after regulators revealed plans to limit the flow of foreign money into Indian shares to avert the risk of the market overheating.
The proposed controls on offshore derivative instruments caused chaos on the Mumbai Stock Exchange with the benchmark Sensex index falling nearly 10 per cent within minutes of opening before trading was suspended. Palaniappan Chidambaram, India's Finance Minister, moved quickly to dispel "alarmist" fears that foreign investment in Indian companies was unwelcome, boosting investor confidence. Most of the lost ground was made up after trading resumed with the index closing less than 2 per cent lower.
Most Asian markets fall as Indian markets are roiled and oil prices remain high
