DAVOS, Switzerland (Reuters) - Financial markets need more clarity on how Chinese authorities are managing their currency, particularly the relationship of the yuan to the U.S. dollar, IMF Managing Director Christine Lagarde said on Saturday.

Chinese 100 yuan banknotes and a U.S. one dollar banknote are seen in this picture illustration in Beijing, China, January 21, 2016. REUTERS/Jason Lee

Sharp swings in the yuan have contributed, along with a dramatic fall in the price of oil, to global market volatility since the beginning of 2016.

Bank of Japan Governor Haruhiko Kuroda, speaking on the same panel at the World Economic Forum in Davos, said he believed China should use capital controls to stabilize its currency while keeping domestic monetary policy loose.

Asked whether she would back capital controls by China for a period, Lagarde avoided a direct reply but said: “Certainly a massive use of reserves would not be a particularly good idea ... Some of it was already used.”

She said that the market needed “clarity and certainty” about China’s exchange rate basket “in particular with reference to the dollar, which has always been the reference”.

“That would be the right move to make,” she added.

Kuroda said China was right to keep monetary policy accommodative to help cushion the country’s transition from a export-led industrial economy to a demand-driven consumer economy without excessive depreciation of the yuan.

“This is my personal view and may not be shared by Chinese authorities, but in this kind of contradictory situation, capital control could be useful to manage exchange rate as well as domestic monetary policy in a consistent, appropriate way.”

He said Beijing was struggling to avoid either an excessive depreciation or an excessive appreciation of its currency.

Chinese economic data signaling slowing growth in the world’s second-largest economy have sent investors into a panic globally in the first three weeks of 2016, with oil prices also plunging as a result of oversupply in the market.

Credit Suisse CEO Tidjane Thiam told the Davos panel that many people in the markets did not necessarily believe China’s official growth figure of 6.9 percent for 2015 and feared the Chinese economy was facing a “hard landing”.

“We believe China will have a soft landing, not a hard landing. A lot in people in the market believe demand in China is decreasing. We don’t agree,” he said.

Part of the market slide was due to a massive distressed sales of assets by sovereign wealth funds and asset managers prompted by falling oil prices, Thiam added.

Both Lagarde and Kuroda suggested investors could trust China’s official growth data.

The Chinese central bank has been generous with liquidity, pumping a net 315 billion yuan ($48 billion) into the banking system ahead of the Lunar New Year holiday in early February.

It was the biggest weekly injection since January 2014 and analysts suspected it was larger than that warranted to avoid any hint of a cash crunch during the long holiday.

According to sources, Zhang Xiaohui, an assistant governor of the central bank, said it would not rush to cut the amount of cash banks must hold in reserves, as doing so could send a strong signal on policy easing.

Yi Gang, a vice governor of the central bank, also said it would keep the yuan basically stable against a basket of currencies.

Italian Economy Minister Pier Carlo Padoan told Reuters the IMF board’s decision to include China’s yuan in the basket of major currencies used to calculate the Special Drawing Right in which the Fund lends to members was “an additional positive constraint” on China’s management of its currency.