ADB calls for ‘Asia-common’ currency to avert crisis

ADB calls for ‘Asia-common’ currency to avert crisis

SEOUL, Sept 30 — The president of the Asian Development Bank (ADB) called today for an “Asia-common” currency as another international reserve currency, as part of the region’s joint effort to prevent another global financial crisis.

“Asia could make the third international currency or Asia-common currency in the near future,” ADB president Haruhiko Kuroda  said at an international seminar on global crisis response.

As the global economic crisis brought about a severe dollar liquidity crunch in emerging countries, many governments had tried to accumulate dollar reserves as a safeguard, he said.

But considering the risks of the reserve currency, a combination of regional and global liquidity support systems could help avoid another currency crisis, he proposed.

The regional approach could be more realistic as it would take decades for special drawing rights (SDRs), the IMF’s internal unit of account, to become a truly international currency, he said.

“A more realistic approach is to develop a multiple reserve currency system,” he said.

South Korea’s top financial policymaker agreed on the need for a mechanism to stabilise foreign exchange markets in emerging markets.

“Without adequate systemic improvements, emerging market countries will be forced to hold larger foreign reserves to prevent another financial crisis,” Financial Services Commission chairman Chin Dong-soo said in an opening speech for the seminar.

“Then, they could seek to increase exports by deliberately weakening their currencies, resorting to protectionist measures. This would aggravate global imbalances,” Chin said. — Reuters

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