* Asian Development Bank urges FX coordination in Asia
* Asian, European officials do not discuss yuan
(Adds quotes, background)
MADRID, April 18 (Reuters) - More cooperation between Asian countries on exchange rate policy would help growth and increase the region's currency flexibility, the head of the Asia Development Bank said on Sunday.
Haruhiko Kuroda, in Madrid for talks between Asian and European financial officials, said the meeting did not specifically address whether China's yuan currency should appreciate, as European policymakers have urged.
But he said if Asian countries cooperated more in setting exchange rate policies, they would not have to fear losing export competitiveness compared to their neighbours.
"By cooperating and coordinating on exchange rate policies in Asia, Asia as a whole can have greater flexibility of currencies vis a vis developed economies ... and that would surely contribute to rebalancing," Kuroda said.
"An exchange rate adjustment in Asia would be quite conducive to rebalance growth from an excessive reliance on exports to more reliance on domestic demand."
In its latest annual outlook report, the ADB said Asia and Pacific economies should coordinate on freeing up exchange rates, while forecasting strong growth for the region this year and next.
Spanish Economy Minister Elena Salgado said although the world economy was improving, it remained fragile and downside risks could not be ruled out, with more cooperation needed between fast-growing Asian countries and Europe to make sure the recovery took hold.
European Economic and Monetary Affairs Commissioner Olli Rehn said on Saturday China should let its yuan currency appreciate to help ease imbalances in the global economy.
The yuan, or renminbi, is pegged to the U.S. dollar and European policymakers generally believe it is undervalued, giving China a trade advantage and creating savings and trade imbalances across the globe.
In notes prepared for EU delegations for a meeting of finance ministers and central bankers from the Group of 20 countries in Washington on April 23, the EU calls for more yuan appreciation.
For a factbox on the G20 positions see (Reporting by Krista Hughes and Nigel Davies; editing by Elaine Hardcastle)