The International Monetary Fund does not expect global economic growth to be affected by the US dollar's weakness, the Fund's first deputy managing director, said today.
Ms Anne Krueger even hinted that the IMF might revise its forecast for global growth. In September, it had forecast global growth for 2004 at 4.1 per cent.
"The global economy will expand better than we had expected. Our formal review will be done in April," Ms Krueger said.
Asked by reporters whether she saw the current spell of weakness in the dollar affecting global growth, the IMF's top policy maker said: "I don't think we see it as such."
Ms Krueger told reporters: "The US economy has been the strength of the world economy and we will argue that to some extent, we have not been getting enough growth in Europe and Japan."
"Given that, if you see possibly faster growth in the world, it will probably reverse the dollar's depreciation."
She said the real rate between the dollar and euro was around its long term average, or the average rate between 1970 and 2000. The US dollar has fallen by 0.69 per cent against Europe's single currency this year after a 20.4 per cent slide in 2003.
Broadly speaking, Ms Krueger said the risks to global economic growth had diminished in recent months.
Protectionism and the failure of the World Trade Organisation's Doha round of talks posed serious risks to global growth, Ms Krueger said.
The United States had worked out a plan to cut its fiscal deficit and with economic activity picking up, she said the current account deficit should also come down.
Regarding China, Krueger believed the country should opt for a more flexible exchange rate. China's yuan is pegged to the falling US dollar.