LONDON -- The Asian Development Bank will start lending in U.S. dollars on July 1, the bank's treasurer, Tomoo Hayakawa, said Wednesday.
"At the moment, we provide [funds in] mixed currencies, but some countries like to borrow in U.S. dollars," Mr. Hayakawa told a business conference.
The Asian Development Bank now lends in a basket of low-yielding currencies, a common practice among multi-national financial institutions.
Its basket consists mainly of Swiss francs and yen, Mr. Hayakawa said.
"For those countries with yen or Swiss franc income, there's no problem," he said. "But given foreign exchange risks, some of our clients have been requesting dollar loans even though interest rates would be higher."
The yield on the benchmark U.S. Treasury bond is about 7.8%, while the key Japanese government bond yields 5.4% and Swiss bonds about 7%.
"If we use lending windows in U.S. dollars, probably our borrowing operations might be more flexible," he added.
Swapping its interest payments into dollars would be much easier for the Asian Development Bank than swapping into the yen or franc, Mr. Hayakawa said.
A Liquid Market
The dollar swaps market is by far the most liquid of all the currency sectors.
Asian Development Bank is planning to borrow $3.1 billion this year, more than doubling the 1991 figure of $1.3 billion.
It borrowed $800 million in 1990 and $600 million in 1989.