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IMF, World Bank Meet To Discuss Currencies

IMF Managing Director Dominique Strauss-Kahn

IMF Managing Director Dominique Strauss-Kahn

The risk of a potential global currency war is expected to top the agenda at meetings beginning on October 8 in Washington of the International Monetary Fund (IMF) and World Bank.

Such fears were voiced by IMF Managing Director Dominique Strauss-Kahn, who said in an interview with France's "Le Monde": "The undervaluation of the [Chinese] yuan is the source of tensions in the world economy which are in the process of becoming a threat."

World Bank President Robert Zoellick warned nations against devaluing their currencies in hopes of boosting their exports, saying such policies don't work.

"History shows there is no future in beggar-thy-neighbor policies and in an increasingly connected world we need not just to be conscious of the negative effects that policies can have on others, but we need to act accordingly. Today we face currency tensions. Tensions can lead to trouble if not properly managed," Zoellick said.

The EU and United States accuse China of keeping the yuan undervalued to make their exports cheap. In June, China announced it would let the value of the yuan float more freely. But since then, the Chinese currency has appreciated just 1 percent.