Premature for Asian c.banks to tighten policy

By Surojit Gupta and Tony Munroe

NEW DELHI (Reuters) - It is premature for Asian central banks to begin exiting from their extraordinarily loose monetary policies given the fragility of economic recovery, a top official with the Asian Development Bank said on Monday.

Rajat Nag, managing director general of the ADB, also said the U.S. dollar would remain a key reserve currency but that other currencies would also gain prominence over the medium and longer term.

"We do consider this as a V-shaped rather than a double-dip recovery, but the dynamics of the growth are frail. The numbers are obviously very encouraging, but they are soft," Nag told Reuters TV on the sidelines of a World Economic Forum event.

"On the one hand you certainly don't want to choke off growth and you also don't want to stoke inflation," Nag said.

"And this balancing act will require the central banks to be very watchful of inflation but our feeling is that, no, it is premature to talk about exiting right now."

He said countries should coordinate their exit strategies and cited the Group of 20 nations as a venue for such dialogue.

"It is important to coordinate the policy. Now, that does not mean the countries will be able to synchronise, because circumstances will be different," he said.

The multilateral lender expects developing Asian economies on average to grow 3.9 percent this year and 6.4 percent next year. The so-called Group of Three or G3 -- Japan, the United States and the euro zone -- are projected by the bank to contract 3.7 percent this year and grow 1.1 percent in 2010.