Asian governments should seize on a favourable economic outlook for the region to allow their exchange rates to move more freely, a senior Bank of Italy official said on Sunday.
A sustained economic expansion in Asia would help to redress global imbalances, which include a US current account deficit of around five percent of national output, Ignazio Visco told the annual meeting of the Asian Development Bank.
"In the same direction, greater flexibility in exchange rates would be desirable. Such a policy shift would also be in Asian countries' own long-term interest," said Visco, director-general for international economic affairs at the Italian central bank.
Visco, a former chief economist for the Organisation of Economic Co-operation and Development, did not elaborate, but he said Asia should also take advantage of current strong growth to scale back government spending and speed up structural reforms.
Asia's foreign exchange rates have not been a major topic at the ADB meeting, where discussion has been dominated by the outlook for China's economy.
Visco said China's booming exports of low-cost goods would entail significant dislocations in Southeast Asia's production and trade patterns but also represented an opportunity for the region to reduce its vulnerability to cyclical swings in industrialised economies.
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