IMF fails to strike deal over currency frictions

The International Monetary Fund on Saturday night failed to reach agreement on tackling mounting global "frictions" over exchange rate policies despite US calls to deal with the issue more forcefully. Pressure has been piling on China to speed up the pace of economic reform by dropping its policy of using a weak currency and reserve accumulation to boost exports. Finance ministers at the 187-strong lending agency have accused China of imperilling the global recovery by fostering the imbalances that are preventing deficit countries like the US and UK from returning to economic health.

European Central Bank president Jean-Claude Trichet last night pointedly reminded China of its commitment last June to "engage in exchange rate flexibility", adding: "There is no need for [emerging economies] to continue to accumulate immense amount of reserve assets." Recent IMF figures showed Beijing had currency reserves of $2.447 trillion, the largest in the world and nearly 30pc of the global total.

George Soros, the respected hedge fund manager, also weighed into the debate. Speaking in London, he said a global "currency war" pitting China versus the rest of the world could lead to the collapse of the world economy. Mr Soros said the China had created a "lopsided currency" system and suggested it allow the yuan to appreciate by 10pc a year – far more than the Chinese will contemplate.

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