IMF head warns of dangers of capital flows
November 16, 2009
Capital flows to emerging markets reflected the positive outlook for those economies, the head of the International Monetary Fund (IMF) said on Friday, but he warned that they could destabilise currencies and asset prices. "The resurgence of capital flows to emerging markets, including several in Asia, is presenting policy challenges," said IMF managing director Dominique Strauss-Kahn. He said the flow of funds to emerging economies showed renewed investor appetite for higher-risk assets. "While capital inflows are generally beneficial, they can raise risks of rapid and potentially destabilising movements of currencies and asset prices," he said. Policymakers had a range of tools to limit the adverse effects, including exchange rate appreciation and tighter fiscal policy, he added. - Reuters
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