The International Monetary Fund's new managing director, Dominique Strauss-Kahn, Friday said the U.S. dollar remains overvalued --repeating the IMF forecast for the greenback--. However he discarded a recession in the US and said it's no surprise to see the price of oil at such a level
"The view the Fund has about the dollar is that the dollar is still overvalued, so that is no surprise to see a decline in the dollar. It's in line with what the Fund is saying," Strauss-Kahn told reporters at a Friday breakfast briefing. This is particularly true "when you look at the mid-term external balances with a high level of deficit, even if it is stabilized today", said Strauss-Khan adding that "our forecast is that we do not see the reason for a recession in the U.S. economy even if it is possible, --we cannot rule it out--, but we do not see the forecast of a recession in the U.S. economy or in other economies". Turbulence in financial markets and interest-rate cuts in the U.S. have helped keep the dollar around record lows against the Euro and other currencies such as the Canadian and Australian dollar and even the Brazilian real and the Indian rupee. Last month, the IMF said in its latest global economic forecasts that its models indicate the dollar is likely to fall further "over the medium term." The IMF recently cut its growth forecast for the U.S. next year to 1.9%, a full percentage point lower than it predicted in July. Strauss-Kahn indicated that that forecast is consistent with the recent rise in oil prices. "Of course, the high level of energy prices may have an influence on the downside, but we don't expect that it could lead to recession," he said. "There is no evident signal it will go further than a slowdown in the rate of growth." In spite of the very high level of oil prices "most expectations are that the long-term trend is rather an increase in the price of oil than something different, so there is no surprise to see today the price of a barrel at such a level". Strauss-Khan said that emerging economies are doing well and should help in sustaining growth at global level "so in those economies we do not see a very strong and deep influence of the high price of oil or other resources like that. On the contrary, it may help them to develop". However the IMF managing director was cautious about the coming months regarding the high level of energy prices and its influence, "of course, the problem is what will in the coming months be the combination of the different downside effectsÃÂ¢€"oil prices, consequences of financial turmoil or I do not know what can happen. But as far as we see on the consumption side, on the US labor market figures released this Friday, which are significant in this point of view there is no evident signal that it will go further than a slowdown in the rate of growth".