12th April 2006 11:32
Warning on dollar!
Asian Development Bank sounds alarm on dollar
Reuters
TUESDAY, MARCH 28, 2006
TOKYO Asian countries need to prepare for a possible sharp fall in the dollar and should allow their currencies to appreciate collectively if that happens, a senior Asian Development Bank official said Tuesday.
"Any shock hitting the U.S. economy or the global market may change investors' perceptions, given the existing global current account imbalance," Masahiro Kawai, the bank's head of regional economic integration, said at a news conference.
"Our suggestion to Asian countries is, don't take this continuous financing of the U.S. current account deficit as given. If something happens, then East Asian economies have to be prepared."
Kawai said the chances of a rapid fall in the dollar were still small, but it could cause a significant turmoil in Asia if it happened.
"If the U.S. dollar goes down in the future, it would be best for East Asian countries to allow appreciation collectively," so that the costs of adjustment could be divided among them, he said.
"I don't think the possibility is high," Kawai said of a dollar plunge, "but it is like avian flu: the possibility of avian flu spreading all over Asia or the world is limited, but once it spreads, it would have tremendous impact."
Kawai said that by East Asia, he meant emerging East Asian markets, excluding Japan.
Kawai said the Manila-based development bank's planned establishment of an Asian currency unit, made up of a basket of Asian currencies, would help monitor the collective path of regional currencies in relation to the dollar.
The benchmark has been delayed by disputes over inclusion of the Taiwan dollar.
But Kawai played down suggestions that an Asian currency unit, or ACU, could foreshadow a single Asian currency in the manner of the European currency unit, which existed for two decades before the creation of the euro in 1999. "The ECU had an official status, but the ACU has no such official status," he said. "We are not in the position to decide whether this should become a real currency or not." $@
He added that a sharp decline in the dollar, which could result from any shock to the U.S. economy and disorderly adjustments of global imbalances, would harm trade in Asia and reduce the value of dollar-denominated assets in the foreign reserves of Asian countries.
The ADB has said allowing greater exchange flexibility in emerging East Asia would lessen the need for foreign exchange reserve accumulation by central banks and thus help contribute to an orderly resolution of global balance of payments imbalance.
TOKYO Asian countries need to prepare for a possible sharp fall in the dollar and should allow their currencies to appreciate collectively if that happens, a senior Asian Development Bank official said Tuesday.
"Any shock hitting the U.S. economy or the global market may change investors' perceptions, given the existing global current account imbalance," Masahiro Kawai, the bank's head of regional economic integration, said at a news conference.
"Our suggestion to Asian countries is, don't take this continuous financing of the U.S. current account deficit as given. If something happens, then East Asian economies have to be prepared."
Kawai said the chances of a rapid fall in the dollar were still small, but it could cause a significant turmoil in Asia if it happened.
"If the U.S. dollar goes down in the future, it would be best for East Asian countries to allow appreciation collectively," so that the costs of adjustment could be divided among them, he said.
"I don't think the possibility is high," Kawai said of a dollar plunge, "but it is like avian flu: the possibility of avian flu spreading all over Asia or the world is limited, but once it spreads, it would have tremendous impact."
Kawai said that by East Asia, he meant emerging East Asian markets, excluding Japan.
Kawai said the Manila-based development bank's planned establishment of an Asian currency unit, made up of a basket of Asian currencies, would help monitor the collective path of regional currencies in relation to the dollar.
The benchmark has been delayed by disputes over inclusion of the Taiwan dollar.
But Kawai played down suggestions that an Asian currency unit, or ACU, could foreshadow a single Asian currency in the manner of the European currency unit, which existed for two decades before the creation of the euro in 1999. "The ECU had an official status, but the ACU has no such official status," he said. "We are not in the position to decide whether this should become a real currency or not." $@
He added that a sharp decline in the dollar, which could result from any shock to the U.S. economy and disorderly adjustments of global imbalances, would harm trade in Asia and reduce the value of dollar-denominated assets in the foreign reserves of Asian countries.
The ADB has said allowing greater exchange flexibility in emerging East Asia would lessen the need for foreign exchange reserve accumulation by central banks and thus help contribute to an orderly resolution of global balance of payments imbalance.
http://www.iht.com/articles/2006/03/28/business/adb.php
plz pray,
Sardarzada