MercoPress. South Atlantic News Agency

Currency appreciation pressures inevitable until US controls budget deficit

World Bank president Robert Zoellick

Fast-growing emerging markets would be facing currency appreciation pressures even without the US quantitative easing policy, World Bank President Robert Zoellick said in an interview on Tuesday.

“Some of this has gotten overwritten, it's inevitable that you are going to find pressures on growing countries' currencies' appreciation even if you didn't have the addition of the quantitative easing policy of the Fed,” Zoellick told Reuters Insider in an interview in Russia's second biggest city.

The United States has been flooding markets with cash as it buys back bonds, pushing up emerging market currencies against the dollar and prompting countries such as Brazil to launch measures to restrain the appreciation trend.

Federal Reserve Chairman Ben Bernanke , facing a chorus of protests about the bond-buying, last week said a more vigorous US economy was essential to fuel the global recovery and dismissed charges he was debasing the dollar.

Zoellick, in Russia to attend a forum to save tigers from extinction, said that in the longer term the United States should focus on other goals to rebuild its economy.

“There is a big debate in the US about the pros and cons and the trade offs of quantitative easing ... I personally think .... the more fundamental issue over time is dealing with the budget deficit, dealing with some of the uncertainty that the business community feels, going back to the growth agenda, resisting protectionism”.

He said China's plans to shift the focus away from export industries in coming years would create the basis for currency adjustment.

”Over time, I personally believe that the (Yuan) currency will appreciate,“ he said.

Zoellick also voiced confidence that problems in Ireland will be resolved, but added that market uncertainty would likely remain for some time to come.

”I am pretty convinced that the combination of the European Union and the IMF will stabilise the situation,” he said.

The EU and the IMF agreed on Sunday to help bail out Ireland with loans to tackle its banking and budget crisis in a bid to protect Europe's financial stability.