(Adds details, quotes, byline)
By Lesley Wroughton
WASHINGTON, March 27 (Reuters) - International Monetary Fund Managing Director Dominique Strauss-Kahn said on Friday the dollar is not under threat but it is "understandable" for China to raise questions about a new global reserve currency.
"It is understandable for the Chinese authorities to raise this question," Strauss-Kahn told reporters via a video-conference from Paris.
"I don't see that the role of the dollar is at threat today," he added.
China this week caused a stir ahead of the April 2 Group of 20 meeting of rich and emerging economies when it suggested the world move toward greater use of IMF Special Drawing Rights, created by the Fund in 1969 as an international reserve asset.
The idea of creating a new reserve currency system based on SDRs has not entirely been knocked down, but G20 leaders have made clear that for now the dollar's status as the dominant reserve unit remains.
Speaking ahead of the G20 meeting in London, Strauss-Kahn said it was important that there was agreement among the leaders to take steps that will pull the global economy out of recession and unclog credit markets.
"It is absolutely necessary for leaders to find an agreement," Strauss-Kahn said. "If there is a big clash at this (Group of 20 meeting) on any topic among the leaders it will not be good for confidence."
Still, he said he believed the summit would in the end show unity rather than division.
He said a recovery in the world economy was possible next year if the right policies are implemented, including fixing the global financial sector, especially cleansing banks' balance sheets of toxic assets.
Strauss-Kahn also said it was important that fiscal stimulus is provided beyond 2009 if needed and that G20 leaders should commit to take additional steps.
"We must make sure that if needed more will be available for 2010," the IMF chief urged.
But he also warned that fiscal stimulus won't be effective unless problems in the financial sector are dealt with.
"Our experience is that you can put as much money as you want in fiscal stimulus but if at the same time you don't clean up the balance sheets of the bank and you don't make the financial sector work again, then it will just melt like snow in the sun," Strauss-Kahn said.
"There are different techniques to do it ... but they have to do it and do it now," he added.
He also urged countries to provide more resources to the IMF to shore up emerging market economies that are turning to the IMF increasingly for financial aid.
"The problem of emerging economies is now becoming one of the biggest problems of the crisis," he said. "If there is any kind of collapse in emerging countries the feedback on the developed economy will be terrible," he warned.
Strauss-Kahn and G20 host Britain have urged countries to at least double the IMF's resources to $500 billion, although it is not clear whether that would be $500 billion in addition to the IMF's current resources of $250 billion. (Editing by James Dalgleish)