US drops opposition to Asian currency unit

Financial Times
Jun. 16, 2006

Related: BIS Calls For Global Currency

The US on Thursday signalled it would not fight efforts to create an Asian currency unit, turning the page on over a decade of largely consistent opposition to Asian monetary integration.

US officials said the move is intended to show that the US does not fear greater monetary co-operation between Asia’s rising economic powers and wants to play a constructive role in helping to shape it.

The green light from the US is a big boost for Japan, which has been pushing the idea of an Asian currency unit loosely modelled on the European currency unit, the precursor to the euro, in face of considerable regional scepticism. It comes at a time of growing diplomatic closeness between Washington and Tokyo.

While formidable obstacles remain to the creation of an Asian currency unit, with Asian countries unable to agree on weightings or on the inclusion of Taiwan, the US decision and the broader evolution of US Asia policy it represents may in time be seen as highly significant.

The signal was given by Tim Adams, the under-secretary for international affairs at the US Treasury, in a closed session of the World Economic Forum in Tokyo.

While Mr Adams spoke in general terms, a copy of his prepared remarks, which has been obtained by the Financial Times, spells out clearly the US position on the Asian currency unit. The remarks say the US believes there has been “some confusion” about its attitude on the ACU. They say “we do not see the ACU as a competitor to the dollar.”

They say the US is “open minded” and adds “we view proposals for Asian currency co-operation with interest.” Mr Adams presented his remarks as a clarification rather than a shift in US policy. US officials admit the US is seen in Asia as being hostile to regional monetary and financial integration in principle, and wants to change that view.