UPDATE: Fed Fisher Plays Down China's Calls For Oversight

SHANGHAI -(Dow Jones)- Federal Reserve Bank of Dallas President Richard Fisher played down the feasibility of persistent Chinese calls for greater international oversight of the U.S. economy, instead asking for greater information sharing between central banks.

"We're all aware we have to regulate the financial system in our own country in a responsible way. At the same time (its necessary to) cooperate with others to the greatest degree feasible," he said.

"But we have to be realistic as to what the limits are...The U.S. Congress is not going to have other sovereign states exert a say" over the U.S. financial system.

Starting in the lead up to the Group of Twenty leaders summit, Beijing has been calling for greater monitoring of economies that issue reserve currencies, a stance reiterated Saturday by Premier Wen Jiabao at the Boao Forum for Asia.

Fisher said while he hadn't seen Wen's comments, the Fed is working to keep all its investors comfortable.

"We understand that as the central bank of the largest and most important economy in the world, we have to conduct ourselves with great care," he said

He also dismissed suggestions that moves by China to allow the yuan to be used overseas as a trade settlement currency may threaten the status of the U.S. currency.

"The initiative by China to slowly liberalize the capital account is not a threat to the U.S. dollar," he said. "It's an expression of China's increasing prominence in the world." ( Personal Comment .: It's not an expression, it's a proof that the Yuan is becoming a reserve currency ,steeling away some of the US dollar's role , value, and power as an international currency ). Tectol

He also said International Monetary Fund special drawing rights won't replace the dollar or euro as an alternative reserve currency.

Prior to the G20 summit, People's Bank of China Gov. Zhou Xiaochuan, posted an essay on the central bank's web site calling for SDRs - a synthetic currency used for transactions between the fund and its member countries - to be developed as an alternative reserve unit.

"SDRs are not a transactable currency. This is all a bit of a tempest in a teapot," he told Dow Jones Newswires.

He also said the ability of the U.S. economy to rebound is in large part dependent on the restoration of credit markets and that "we sense and feel that the credit markets are achieving a better tone."

Currently, Fisher isn't a voting member of the Federal Open Market Committee, which sets interest rates.

Fisher has already visited Japan, Singapore, Hong Kong and China on this trip. He will also visit South Korea before returning home.

-By Denis McMahon, Dow Jones Newswires; 8621 6120-1200; denis.mcmahon@dowjones.com

(END) Dow Jones Newswires

April 18, 2009 07:01 ET (11:01 GMT)

Copyright (c) 2009 Dow Jones & Company, Inc.

That call has in large part been born from concerns that U.S. monetary policy will whittle away at the value of China's massive foreign exchange reserves, most of which is denominated in U.S. currency, by weakening the dollar or feeding inflation.