- The Washington Times - Thursday, July 12, 2001

The strength of the U.S. greenback against other currencies puts the Bush administration under pressure to explain its dollar policy ahead of the annual summit of leading industrial powers, analysts said yesterday.

The Bush administration has generally supported the strong dollar policy of the Clinton administration, which is seen as one reason for the firmness, several economists and currency traders said.

The Bush team has yet to formulate a clear policy of its own, but it appears to have no interest in intervening in currency markets, the analysts said.

"There is a less clear strong dollar policy than when Clinton left the White House, " said Kevin Harris, international economist at MM CurrencyWatch in New York. "We have a new administration, but it hasn't enunciated a new policy."

David Solin, partner at FX Analytics in Essex, Conn., questioned the need for formulation of a new policy, because "there is no major shift."

"The times and people are different, but I'm a bit leery of reading more into it, " he said.

The U.S. currency, which has maintained continuous strength despite the current U.S. economic slowdown, has provoked calls on Mr. Bush and his economic advisers to reconsider the strong dollar policy they inherited.

Treasury Secretary Paul H. O'Neill "is not saying the United States supports a strong dollar as often as his two predecessors," Robert E. Rubin and Lawrence Summers, Mr. Harris said.

He noted that Mr. O'Neill's response to complaints from manufacturers was that "a well-run company doesn't need a weak dollar to do well and U.S. companies have to learn to be competitive in any foreign exchange environment."

In a letter to Mr. O'Neill last month, the National Association of Manufacturers and five other groups said the U.S. currency's strength was "having a strong negative impact on manufacturing exports, production and employment."

"A growing number of American factory workers are now being laid off principally because the dollar is pricing our products out of markets, both at home and abroad, " the letter said.

It also pointed out that the dollar had risen 27 percent since early 1997 against other big currencies, which has had a "staggering" effect on U.S. companies.

Earlier this week, Edward George, governor of the Bank of England, warned that the strength of the dollar is damaging the U.S. and European economies.

Speaking after the meeting of central bankers in Basel, Switzerland, he said the strong dollar was having "perverse" effects on both sides of the Atlantic.

But Washington has resisted intervention in the foreign exchange market and is likely to continue doing so, currency analysts said.

"Bush's people are clearly noninterventionists, and any foreign attempt for intervening is unsuccessful without backing from the United States, " said Peter Stoneham, senior foreign exchange analyst at Thomson Global Markets in London.

David Ethridge, head of currency strategy at Standard & Poor's MMS in New York, said intervention never solves long-term problems. "It's not a good idea to manipulate the market at a time when the Federal Reserve is cutting interest rates."

Mr. Harris said it is not clear who exactly is in charge of dollar policy in the administration, Mr. O'Neill or Larry Lindsey, Mr. Bush's chief economic adviser.

"The question is, do we know that O'Neill has a firm enough hold on his position and enough weight with Bush to enforce a strong dollar policy, or could someone try to change his mind. Lindsey is trying to offer a nuanced view of when the dollar can be weakened. They are suspected of competing for the president's ear on dollar policy, and it's too early to know who's going to win, " Mr. Harris said.

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