May 11 (Bloomberg) -- Former Federal Reserve chairman Alan Greenspan said he sees a 2-to-1 chance that the U.S. will avoid a recession even as the economy slows.

``At the moment, I still say as I said before, by algebraic implications, the odds are 2 to 1 we won't have a recession,'' Greenspan said today, according to a recording of his comments at a conference hosted by Merrill Lynch & Co. in Singapore obtained by Bloomberg News.

Greenspan in late February predicted that U.S. economic growth might stagnate. In March, he said there was a ``one-third probability'' of a recession this year and the current expansion wouldn't have the staying power of its decade-long predecessor.

``There is no doubt there is a slowdown going on in the U.S.,'' Greenspan said today via satellite from Washington. ``We are clearly having troubles in the capital investment area, as well as potentially in the consumption area and obviously housing being a significant drag.''

The U.S. stock market yesterday tumbled the most in almost two months after falling retail sales, higher import prices and a wider trade deficit heightened concern the economy will slow. U.S. policy makers on May 9 kept the benchmark interest rate at 5.25 percent and said inflation is the biggest risk facing the economy despite a yearlong slowdown.

China's Yuan

China should allow the yuan, or renminbi, to appreciate a ``lot faster'' than it has been, Greenspan said. The central bank has allowed the currency to rise 7.7 percent since China scrapped a dollar peg in July 2005.

China's currency reserves are the world's largest and accumulated in part through purchases of dollar-denominated U.S. Treasuries made to temper yuan appreciation. The reserves rose to a record $1.2 trillion at the end of March.

``Unless the intervention into the foreign exchange market comes to a halt, which is another way of saying that they'll allow the renminbi to rise, they would find it at some point extremely difficult to handle the imbalance problem,'' Greenspan said. ``They cannot do this indefinitely without very serious consequences.''

Greenspan said patriotic Japanese investing in the nation's bonds were keeping yields low, making the yen an attractive currency in which to borrow to invest in higher-yielding assets, known as the carry trade. The trade has helped to push Japan's currency to a 21-year low against its trading partners.

Patriotic Investors

``Patriotism isn't the reason Japanese investors are buying government bonds,'' said Kazuhiko Sano, chief strategist at Tokyo-based Nikko Citigroup Ltd., the fifth-largest buyer at government debt auctions. ``It's because they are not taking a risk on currency fluctuations and volatility in the market, which is quite reasonable.''

Asia is more likely to suffer from ``asset-related'' problems than a repeat of the 1997-98 financial crisis that depleted the region's foreign-exchange reserves, Greenspan said. China's CSI 300 Index has climbed 49 percent since its 9 percent slump on Feb. 27 triggered a global stock market rout.

Increased bank lending and money inflows from overseas have created property asset bubbles in South Korea and India, making Seoul the world's second-priciest city and some Mumbai apartments as expensive as those in Manhattan.

Southeast Asia's export-dependent economies will be hurt by a slowdown in U.S. consumption, Greenspan said. Still, higher domestic spending may limit any impact of declining overseas sales, he said.

Asian Exports

``There is no question if consumption in the U.S. slows down, you'll find that exports in Southeast Asia will slow down somewhat,'' he said. ``Overall Asia, and specifically the developing world, is moving at twice the pace of the developed world and as the extraordinarily high savings rate begins to be employed domestically, part of that will be offset.''

Greenspan's comments support the conclusion drawn by Asian finance ministers attending the Asian Development Bank's annual meeting in Kyoto this month.

Asia will withstand a slowdown in the U.S. and Europe this year, driven by expansion in China and India, the two fastest- growing major economies in the world, the region's finance ministers said.

The ADB in March raised its forecast for the region's developing economies this year, citing a pick-up in spending by consumers and companies that will cushion the impact of weaker overseas sales.

``While a moderate slowdown is expected this year in the U.S. and the European Union, I believe China and India will continue to be the driving forces of the world economy,'' said South Korean Finance Minister Kwon Okyu.

To contact the reporter on this story: Shamim Adam in Singapore sadam2@bloomberg.net

Last Updated: May 11, 2007 06:26 EDT