Asia Pacific economies must refrain from competitive currency devaluations and are vulnerable to speculative buying in the housing market, the APEC grouping's research arm said.
Massive inflows of funds from industrialised economies into the region where they can get higher returns have pushed local currencies to appreciate, eroding competitiveness in the global markets, APEC's Policy Support Unit said in a research paper.
The paper, released Wednesday ahead of a weekend meeting of Pacific Rim trade ministers in Surabaya, Indonesia, said competitive currency devaluations could lead to bigger trade imbalances.
"It is of concern that the attempt to regain competitiveness may result in a simultaneous currency intervention by monetary authorities," said the unit, the research arm of the Asia Pacific Economic Cooperation (APEC) forum.
"If that were to occur, it would create larger imbalances in the patterns of global trade and investment," the paper said, adding it was crucial for APEC "to remain committed to refrain from competitive devaluation of currencies".
The paper said the 21-member APEC should grow 4.2 percent this year and 4.7 percent in 2014, from a 4.1 percent expansion in 2012.
However it said challenges remain, including lingering risks of a fallout from the eurozone debt crisis and the impact of large capital inflows from developed countries seeking larger returns in emerging markets.
"The recent large scale monetary easing programmes pursued by some advanced economies have raised some concerns of possible currency intervention by other monetary authorities," the paper said.
It did not name any country, but analysts fear Japan's recent efforts toward monetary-easing, which includes allowing a sharply weaker yen to boost Japanese exports, could prompt other countries to take similar devaluations and trigger a currency war.
The paper also raised a red flag about speculative buying that has sent property and stock prices skyrocketing, and urged regional policymakers to take steps to prevent asset bubbles.
"There are ongoing concerns about the health of public finances and the banking system, especially in Europe, as well as price pressures on property and stock markets," said Denis Hew, the APEC Policy Support Unit's director.
In Hong Kong, where the property market is driven by demand from overseas buyers, residential property prices in 2012 were higher by 88 percent compared to 2007 levels, it said.
Average house price in Singapore in 2012 was 24 percent higher than in 2007, it added.
The paper cited data by property consultancy Jones Lang LaSalle saying direct investment flow into real estate worldwide should reach $500 billion this year, up 13 percent from last year, with a substantial portion likely to enter the Asia Pacific.
It warned that "since capital flows are volatile, there is a risk that sudden reversal of capital inflows would lead to sharp asset price corrections which could cause detrimental damage to the real economy".
APEC groups 21 economies on the Pacific Rim from China to Chile via the United States.