The IMF is set to say an overvalued dollar and undervalued euro are among risks to a global economic recovery, a German government source said today.
He said he expected currencies would also be discussed at a meeting of Group of Seven finance ministers in Washington at the weekend.
The euro gained over a cent against the dollar yesterday to hit a three-month high around $0.89, but the greenback showed no immediate reaction to the German official's comments.
The source said the IMF believes a limited depreciation in the value of the yen would be acceptable within a wider plan to reflate the Japanese economy. He said this did not mean active intervention to push down the yen.
A limited depreciation would be acceptable if it was part of a wider macroeconomic package and as long as care is taken about the possible impact on Japan's neighbours, the source said.
According to the source, the IMF sees other risks to the world economy coming from oil prices, given current tension in the Middle East and uncertainty about the next steps in the United States's "war on terrorism", and from over-optimism in financial markets about the global recovery.