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UPDATE 1-US' Geithner sees "no risk" of currency war

Published 10/12/2010, 10:55 PM
Updated 10/12/2010, 10:56 PM

* No risk of currency wars - Geithner in TV interview

* Yuan more of a global than U.S. problem-Geithner

* Geithner says confident Beijing to let yuan gain over time (Adds details, Geithner quotes from interview)

WASHINGTON, Oct 12 (Reuters) - U.S. Treasury Secretary Timothy Geithner said on Tuesday he sees "no risk" of a global currency war and wants to maximize incentives for China to allow its yuan to rise in value.

He told the Charlie Rose Show in an interview that China would work against its basic development objectives if it kept its currency undervalued.

"I'm very confident over time that this is going to happen," he said of Chinese currency appreciation. "We just want to make sure it's happening at a gradual but still significant rate."

Asked to respond to talk and media reports of a "currency war", with multiple countries taking action to stem the rise in their currencies, Geithner said, "No risk of that."

Asked to explain, the Treasury chief said that many other emerging markets were seeing major capital flows.

"And that's unfair to them because what's happening is, as China holds its currency down, their currencies are moving up," Geithner said. "And they're having to work very hard to make sure they're not at an unfair disadvantage with China. And that's why this issue, which people like to frame as uniquely an American preoccupation, is really much more important to the rest of the world and is really a global problem as a whole."

Geithner did not mention a Treasury report due on Friday on whether China or any other country manipulates its currency. He has said recently that declaring China a manipulator at this time would be not be productive because it would require consultations with Beijing that were already underway.

Turning to a domestic scandal involving allegations that some mortgage lenders used shoddy paperwork to justify thousands of home forclosures, Geithner said that declaring a national foreclosure moratorium would be "very damaging" because it would halt the recovery process for many neighborhoods hard-hit by the housing collapse.

Some Democratic U.S. lawmakers, including Senate Majority Leader Harry Reid, who faces a tough re-election battle in Nevada, have called for the largest lenders to halt foreclosures in all 50 states.

Geithner said this would have unintended consequences by delaying the sales of homes with failed mortgages and foreclosures that are justified.

"What it means is those communities will be living longer with houses unoccupied, with more pressure on their house prices for the people still in their houses," he said (Reporting by David Lawder; Editing by Tomasz Janowski)

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