Explain the reasons countries devalue their exchange rate. Pls be thorough, esp. with competitive argument. Co

Answer 1

The US did it for Russia to keep it the dollar as the currency of choice:
Dollar to Remain Reserve Currency of Choice — Russian FM
Created: 26.04.2004 11:57 MSK (GMT +3), Updated: 16:32 MSK

MosNews


While in Washington, Alexei Kudrin, Russia’s finance minister spoke to journalists and expressed the opinion that the U.S. dollar will remain the world’s main reserve currency, “unrivalled” by other currencies for quite a long time.

Kudrin is leading the Russian delegation at a session of management bodies at the International Monetary Fund (IMF) and World Bank. On April 25 Kudrin along with the Russian Central Bank chief Sergei Igranyev held a working meeting with U.S. Treasury Secretary John Snow and Federal Reserve Board chairman Alan Greenspan.

Asked by the Russian Itar-Tass news agency if the Central Bank was switching from the dollar to other currencies to maintain the country’s international currency reserves, Kudrin said that “the U.S. [foreign] exchange policy forced everyone to think of greater diversification of their reserves in the past year.” He went on to express an opinion that “this policy is double-edged. It is good for bolstering short-term and medium-term [economic] growth, but it may lose in the long term by denting confidence in the dollar as a world reserve currency.”

However, Kudrin said, currently it is too early to draw any conclusions about the future fate of the dollar as a reserve currency because no “radical changes” had taken place in the balance of forces in the global economic and financial sphere, BBC reported. “Centers of economic power have not seriously changed and have not gone through a diversification process,” said the Russian finance minister adding that “the European Union economy has not become stronger than the U.S. one” and that Europeans “have their own problems”.

In other news, Kudrin said that Russia hopes to pay off its debt to the IMF in 2006. Currently Russia’s debt to the Fund stands at $5.1 billion. This year $1.7 billion will be repaid.