Faster yuan-flexibility steps needed, IMF chief tells China

Jan 22 | Updated: Jan 23 2007, 05:30am hrs
International Monetary Fund managing director Rodrigo de Rato called on China to speed the implementation of more currency flexibility to aid its own economy.

We believe that implementation of currency flexibility could be sped up, de Rato said in an interview after addressing a meeting of Asian central bankers in Tokyo. He declined to give a specific time frame.

De Rato repeated comments made in Singapore in September when he noted the vigour of Chinas economy, the worlds fourth- largest, gives authorities an opportunity to loosen their grip on the currency and slow inflows of capital.

Greater flexibility would be good for the Chinese economy because it would drive private consumption and help reward savings, he said on Monday. It is in Chinas interest to equip itself with more tools to manage its macro-economy. China ended a peg to the US dollar in July 2005, revalued the yuan by 2.1 % and allowed it to trade against a basket of currencies. Since then, the yuan gained about 4 % against the dollar.

De Rato said that Japans economic competitiveness wasnt based on yen weakness. Since the beginning of last year the yen has dropped 3 % against the dollar, the second worst among 15 currencies tracked by Bloomberg.

He said the Bank of Japans decision last week to keep interest rates at 0.25% was appropriate because of the lack of inflationary pressure in Japan and the weakness in private consumption.

De Rato forecast that crude oil prices in 2007 would trade on average between $52 a barrel and $54 a barrel down from the IMFS forecast of $72.5 a barrel in September.

Bloomberg