'Foreign exchange management must not distort competitiveness'
'Foreign exchange management must not distort competitiveness'
Dow Jones, Phuket, Thailand
International Monetary Fund (IMF) Managing Director Horst
Koehler doesn't oppose a certain degree of exchange rate
management as long as it doesn't distort competitiveness in the
market.
In separate interviews with Thai dailies Bangkok Post and the
Nation published on Saturday, Koehler took a midway stance
between the U.S. and China on the need for greater currency
flexibility.
"If you are using the foreign exchange regime to improve
competitiveness, it would lead to competitive devaluation which
is an irresponsible act," he told the Bangkok Post.
"We need to find a win-win approach which creates a strong
growth path, but not one at the expense of the rest of the
world," he said.
Koehler was speaking after attending two days of intense talks
among finance ministers from the Asia Pacific Economic
Cooperation forum on process toward exchange rate reform.
APEC ministers rebuffed a U.S. push for them to call for
flexible exchange rate regimes in the region, which effectively
would be a signal to China to loosen its tight grip on the yuan.
A statement, fudging differing views among participants,
vaguely called for "appropriate exchange rate policies" but
merely noted the U.S. view that a flexible exchange rate
management promotes greater economic growth and financial
stability.
Asian central banks have adopted varying degrees of exchange
rate management since the 1997 financial crisis to protect their
currencies from speck countries deliberately depreciating their
currencies to boost growth leads to increased trade
protectionism. He said that sound fiscal policies are a better
way to counter currency volatility, once a more flexible exchange
rate system is adopted.
But he also shared China's view that no single currency regime
is best for all countries.
"I don't oppose the idea of having a management element in a
way that acts against the market," he told the Nation. "(But) any
time you act against underlying market trends, you put at risk
your own reputation, because the market might fear that something
is hidden."