ADB head: Dollar strength 'corrected', market turmoil unlikely

Wed Apr 20, 2016 6:43am EDT
 
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By Tetsushi Kajimoto and Takashi Umekawa

TOKYO (Reuters) - Asian Development Bank President Takehiko Nakao said on Wednesday that the "correction" of dollar strength since the start of this year is unlikely to cause market turmoil, with the yuan and other Asian currencies stabilizing.

The head of the Manila-based lender also gave a sanguine view on China, saying that the world's second largest economy will avoid a hard-landing as it rebalances from investment to consumption-led growth.

"Asian currencies including the yuan are more stable now than before. China must not hurry to loosen its existing regulations against capital outflows and it may intervene to an extent" to support the yuan, Nakao told Reuters in an interview in Tokyo.

Nakao said expectations for higher dollar interest rates have been digested in the market, causing dollar strength to be "corrected", while investors bet the United States will go slow in raising interest rates.

"I don't expect the correction of dollar strength to cause a big turmoil in financial markets. I have not heard concerns about a currency war in Asia," said Nakao, former Japanese vice finance minister for international affairs.

GROWTH MOMENTUM IN SOME PLACES

The ADB has forecast that growth in China would slow to 6.5 percent this year from 6.9 percent in 2015, its weakest expansion in a quarter of a century. Growth is projected to slow to 6.3 percent in 2017, according to the ADB.   Continued...

 
Asian Development Bank (ADB) President Takehiko Nakao gestures at the entrance of ADB headquarters in Mandaluyong, Metro Manila after a forum with members of the Foreign Correspondents Association of the Philippines January 8, 2016.  REUTERS/Erik De Castro