APEC ministers endorse 'market-oriented' currencies

U.S. Treasury Secretary Timothy Geithner said the timing of stimulus exit policies would vary between countries, but business confidence and the financial system must be restored first.

“The challenge is growth. First growth, but make sure we have business confidence restored, investments expanding again, unemployment coming down, financial sector definitively repaired — that's our basic challenge,” Geithner said in Singapore after a meeting of Pacific rim finance ministers.

The ministers of the 21-member Asia Pacific Economic Cooperation (APEC) discussed strengthening the post-crisis global economy to prevent asset bubbles and excess leverage with prudent macroeconomic and regulatory policies.

In a statement they agreed to “undertake monetary policies consistent with price stability in the context of market-oriented exchange rates that reflect underlying economic fundamentals”.

The group includes China, which has effectively pegged its currency against the dollar since the middle of 2008 to help fend off the global downturn.

Other APEC economies aside from China manage their currencies to some degree, including Singapore, Malaysia and Vietnam.

U.S. President Barack Obama told Reuters in an interview this week that he would raise the currency issue on a visit to China next week. His administration says an undervalued yuan is one factor contributing to economic imbalances between the first- and third-biggest economies in the world.

China's central bank said on Wednesday it will consider major currencies in guiding the yuan, suggesting a departure from the effective dollar peg.

“I'd say that ... is the most significant news we've had on the yuan for months, and that APEC is more of a formal reminder from China's closest neighbours, not just the U.S. and Europe, that forex rigidity in a huge trading economy is not a domestic issue,” said Westpac Banking Corporation strategist Sean Callow.

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