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Shanghai (AFP) Oct 13, 2010 A loose monetary policy in the United States hurts the global economy and puts massive inflation pressure on emerging economies, a researcher with a Chinese government think tank said Tuesday. The criticism of US monetary policy and its weakening dollar comes as Washington steps up attacks on Beijing over its yuan exchange rate, which US lawmakers claim is grossly undervalued and is causing global trade imbalances. US policies were putting pressure on emerging economies' currencies and fanning inflation in them as they import resources denominated in dollars at higher prices, Zhang Monan, a researcher at the State Information Centre said in comments published in the official China Securities Journal. A weaker dollar tends to boost demand for dollar-priced resources, which come cheaper for buyers using stronger currencies. In turn, that usually lifts demand and prices. "Data showed that nearly two-thirds of the 20 emerging economies have negative real interest rates. The upward pressure on overall price levels is huge," she wrote. "The quantitative easing monetary policy in the US will severely hurt the balance of international payments and currency reserves in emerging economies," Zhang wrote. The dollar has fallen 6.5 percent against a basket of major currencies since September while the Chinese yuan has risen 1.74 percent against the dollar in the same period, the researcher said. Zhang noted that given the current situation, an interest rate hike may not help China curb domestic inflation as monetary liquidity floods global markets and pushes prices higher. With the interest rate gap between China and other countries, a rate hike may increase upward pressure on the yuan and lead to more speculative funds flowing in, she said.
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