(FT) -- Governments are risking a currency war if they try to use exchange rates to solve domestic problems, the head of the International Monetary Fund has warned.
The comments by Dominique Strauss-Kahn came before the yen fell as a result of the Bank of Japan shifting towards quantitative monetary easing, cutting its key interest rate and proposing a new fund to buy government bonds and other assets.
"There is clearly the idea beginning to circulate that currencies can be used as a policy weapon," Mr Strauss-Kahn told the Financial Times on Monday.
"Translated into action, such an idea would represent a very serious risk to the global recovery . . . Any such approach would have a negative and very damaging longer-run impact".
The yen dropped against the dollar on Tuesday after the BoJ announced its decision. Government bonds, stocks and gold prices all rose on the expectation that central banks of the world's biggest economies would embark on a round of quantitative easing.
CNN
