IMF chief warns of dollar decline if no US debt deal

Failure by the United States to raise the debt ceiling by the Aug 2 deadline could lead to a fall in the value of the dollar and raise "doubts" among those using it as a reserve currency, the head of the IMF said.

"It would probably entail a decline of the dollar relative to other currencies, and probably doubts in the mind of those people who reserve currencies as to whether the dollar is effectively the ultimate and prime currency of reserve," Christine Lagarde told PBS NewsHour in an interview on Thursday.

Lagarde, a former French finance minister, said it was difficult to predict what the market fallout would be if the US did not reach an agreement and the country defaulted. "There are so many counterparties that are invested in US Treasury funds, it would be very difficult and very dramatic," she added.


In Washington, a Republican plan to cut the budget deficit stumbled toward a vote in Congress on Thursday and its expected demise could force a compromise to avert an imminent and unprecedented debt default by the world's largest economy.


With the measure short of as many as four votes, according to aides, the Republican-led House of Representatives abruptly delayed a vote as Speaker John Boehner struggled to overcome objections from conservative rebels in his own party.
The Telegraph

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