The truth is that SDRs are clumsy and cumbersome. The IMF report recognizes that moving to SDRs is only a partial move away from the U.S. dollar as the world reserve currency and urges the adoption of a currency unit that would be truly international. The IMF has been at odds with U.S. President Donald Trump over his use of tariffs to resolve trade imbalances, but its assessment that the dollar is overvalued is likely to give Trump more fodder for his frequent complaints that dollar strength is hampering U.S. exports. ", When pricing goods in the U.S. dollar, "a country's depreciation does not make goods and services cheaper for foreign buyers, at least in the short term, creating little incentive to increase demand," said the report. IMF Home page with links to News, About the IMF, Fund Rates, IMF Publications, What's New, Standards and Codes, Country Information and featured topics Congress is considering a new round of relief that is likely to cost at least $1 trillion on top of the more than $2 trillion passed earlier this year. Reporting by Andrea Shalal; Editing by Shri Navaratnam and Bernadette Baum. WASHINGTON (Reuters) - The International Monetary Fund said on Wednesday the U.S. dollar was overvalued by 6% to 12%, based on near-term economic fundamentals, while … Gopinath also noted that disputes over technology, such as the U.S. decision to put Chinese technology company Huawei on its ‘entity’ list - could also fracture global supply chains, raising concerns about investment and productivity. Net debtor positions were at a similar level. There is fiscal space to do that,” he said, urging spending on infrastructure. While the report assessed the euro’s valuation as appropriate for the euro zone as a whole, it said the euro’s real effective exchange rate was 8% to 18% too low for Germany’s fundamentals, given its high current account surplus. He added that at the same time, companies have become much more vulnerable globally than during the 2008 global financial crisis, because the low interest rate environment has sharply boosted corporate borrowing. “The concern isn’t whether the US dollar will see an accumulated decline of 30 percent in the future, but whether there will be a blow-up event that causes a sudden loss of confidence in the US dollar, and its market to collapse,” Zhu told the South China Morning Post. Under the paradigm, exchange rate fluctuations can also have effects through their impact on firms' balance sheets, according to the IMF. The greenback's prevalence is unfavorable for emerging markets and developing economies (EMDEs) to recover, according to the International Monetary Fund (IMF), citing that Dominant Currency Pricing and Dominant Currency Financing hinder trade. “So, the question of whether there will be a financial crisis will depend on whether a major company will be the next to go bankrupt, and thereby result in a jump in the corporate default ratio, leading to a sovereign debt crisis,” Zhu said. Structural changes, such as improving access to credit and better transportation infrastructure, could be more useful in the short term, she said. ", Moreover, the IMF said a global strengthening of the U.S. dollar entails short-term contractionary effects on trade, because the weakening of other countries' currencies vis-Ã -vis the U.S. dollar leads to higher domestic currency prices of their imports. The COVID-19 pandemic has hit the world economy hard, and drastically collapsed global demand and commodity prices, capital outflows, and disrupted major supply chains and dwarfed global trade. See here for a complete list of exchanges and delays. All rights reserved. The economists added that "the share of U.S. dollar trade invoicing across countries far exceeds their share of trade with the U.S. Companies on the entity list cannot buy parts and components from U.S. companies without government approval. All quotes delayed a minimum of 15 minutes. For more stories on economy & finance visit RT's business section. Trump has railed against European and Chinese policies that lead to what he calls a devaluation of the euro and other currencies against the dollar. Our Standards: The Thomson Reuters Trust Principles. The official explained that while the US Federal Reserve’s aggressiveness in easing financial conditions has succeeded in halting a further decline in the economy, companies could still go bankrupt as they adapt to the new norm in which work resumption must coexist with social-distancing measures because the coronavirus crisis has persisted longer than expected. The Fund said short-term financing risks were generally contained since debtor positions were concentrated in reserve currency-issuing economies. Instead of tit-for-tat tariffs, surplus and deficit countries should work to revive liberalization efforts and strengthen the rules-based multilateral trading system that has been in effect for the past 75 years, the IMF said.