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The former French finance minister had been a key ally for the European Union as Greece, Ireland and Portugal all sought billion pound bail-outs to pay their debts.
Europe's finance ministers are due to meet in Brussels on Monday to hammer out the final details of a €78bn (£69bn) IMF-backed bail-out for Portugal and discuss further funding for Greece.
Mr Strauss-Kahn had been due to brief German chancellor, Angela Merkel, on Sunday on the IMF's position as well as attend meetings in Brussels.
Economists said Mr Strauss-Kahn's absence could not have come at a more sensitive time. Concerns are growing that Greece will fail to hit IMF imposed targets to qualify for June's €3.3bn payment from last year's original €110bn bail-out. Simon Ward, chief economist at fund manager Hen-derson, said: "I would think that the Portuguese bail-out is pretty much locked down, but the question of additional support for Greece remains. This will complicate negotiations and I would expect the markets to react negatively."
Mr Ward said Mr Strauss-Kahn, who has denied the sexual assault charges, had been "crucial" in securing US-backed funding of the rescue deals. "He has steam-rollered any opposition to the European bail-outs and has been a crucial figure," said Mr Ward.
"A person a bit less suppor-tive of the eurozone and we could potentially have already seen a default in one of those struggling economies."
US economist Nouriel Roubini said he had expected Mr Strauss-Kahn to back a rescheduling of interest payments on Greek debts rather than any further cash bail-out.
The IMF, which extended almost $92bn (£57bn) in emergency loans last year, said it remained "fully functioning and operational" following the arrest of its chairman. John Lipsky, the IMF's first deputy managing director is its acting head. Mr Lipsky, who announced last Thursday that he would step down in August, on Sunday held an emergency board meeting in Washington.
The IMF has already come under pressure from the US Congress to be tougher on European debts. Mr Ward said the arrest could "open the door" to those wanting the IMF to rein in its lending.
The fund has found its ability to offer cash in return for structural reforms, debt rest-ructuring and currency depreciation has been limited in Europe given the EU control of debts and the single currency.
Mr Strauss-Kahn was due to stand down next year. Traditionally, a European leads the IMF, with the US taking the lead at the World Bank. David Cameron has said the IMF should look outside Europe for its new leader, given the growth of India and China.
Separately, Italian central bank governor Mario Draghi is on Monday expected to be approved as the next president of the European Central Bank.
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