BERLIN, March 24: The International Monetary Fund will say further depreciation by the US dollar is needed to help correct global imbalances in its latest World Economic Outlook (WEO), Germany's Sueddeutsche Zeitung said on Saturday.

Quoting from a draft of the WEO, the paper said theWashington-based fund argued extraordinarily aggressively for a correction in exchange rates, above all so as to reduce the massive US current account deficit.

The dollar, which slid to a 2-year low against the euro last week, should continue to depreciate in the mid-term, while the yen, the Chinese yuan and currencies of oil-exporting countries in the Middle East should all appreciate, the draft WEO said.

The WEO, which is due to be published in mid-April, will add that there is no great need for further interest rate increases by the European Central Bank, according to the paper.

Thanks to solid growth in the 13-nation euro zone, the ECB would not create problems by raising its main lending rate to about 4.0 per cent from 3.75 per cent at present, the IMF said.

NEW YORK: The dollar gained traction against most major currencies Friday after stronger-than-expected figures on US home sales eased concerns about the housing market, and the overall economy.

The euro dropped to $1.3286 after 1.3328 late Thursday in New York.

The dollar was meanwhile trading at 118.05 yen, little changed from 118.07 on Thursday.

US home sales rose 3.9 per cent in February as the struggling real estate market showed some signs of a rebound, industry data showed Friday.

The National Association of Realtors (NAR) said existing home sales improved to an annualized pace of 6.69 million, well ahead of market expectations of a pace of 6.30 million.

The monthly report also showed signs that lower prices -- following a long boom in the property market that ended last year -- are starting to stimulate sales.

The February existing home sales report added another dimension to speculation surrounding one of the most besieged sectors in the US, said John Kicklighter at Forex Capital Markets.

When the indicator ran across the wires with an unexpected improvement, the dollar quickly turned higher against most of the majors, But enthusiasm was tempered by news that the median sales price fell 1.3pc to $212,800, the seventh decline in a row.

The property market has been struggling as lending rates have increased and speculators have pulled out of what had been a sizzling sector.

Kicklighter said the housing market and the dollar may not be out of the woods yet.

He said most of the February data came before the crunch in the subprime”credit markets.

In the end, the forecast for the housing market is still bearish, he said. But according to analyst Jamie Coleman at Thomson's IFR Markets: One thing is clear that was not early this week: the US is not in danger of sliding headlong into recession.Coleman added: Home sales are near a three-year high, ... employment remains strong and stocks have recovered much of their losses of recent weeks. In late New York trade, the dollar stood at 1.2185 Swiss francs from 1.2143 late Thursday.

The pound was being traded at $1.9613 after 1.9643.---Reuters/ AFP