October 8, 2009
More than a decade after former US Treasury Secretary Robert Rubin made the ``strong dollar'' national policy, currency traders say the same words coming from the Obama administration have little meaning.
Timothy Geithner, the current Treasury secretary, has tolerated the greenback's 12 per cent slide from its peak this year in March as measured by the Federal Reserve's trade-weighted Real Major Currencies Dollar Index. While he said as recently as Oct. 3 that ``it is very important to the United States that we continue to have a strong dollar,'' the last time the US intervened in markets to support its currency was 1995.
The weaker US dollar may boost America's exports as the economy recovers from the deepest recession since the 1930s. The risk is that it may also drive away America's largest creditors just as the Treasury relies more than ever on foreign investors to buy the bonds financing Barack Obama's stimulus spending. The US dollar's share of global currency reserves fell in the second quarter to 62.8 per cent, the lowest level in at least a decade, the International Monetary Fund in Washington said on Sept. 30.
``Since the (US) dollar has been weak and weakening for years, Geithner was using a code phrase, a carry-over from the Bush administration,'' said David Malpass, president of research firm Encima Global in New York. ``It means that the US approves of a constantly weakening dollar but doesn't want a disruptive collapse,'' said Malpass, the former chief economist at Bear Stearns Cos. and deputy assistant Treasury secretary from 1986 to 1989.
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More than a decade after former US Treasury Secretary Robert Rubin made the ``strong dollar'' national policy, currency traders say the same words coming from the Obama administration have little meaning.
Timothy Geithner, the current Treasury secretary, has tolerated the greenback's 12 per cent slide from its peak this year in March as measured by the Federal Reserve's trade-weighted Real Major Currencies Dollar Index. While he said as recently as Oct. 3 that ``it is very important to the United States that we continue to have a strong dollar,'' the last time the US intervened in markets to support its currency was 1995.
The weaker US dollar may boost America's exports as the economy recovers from the deepest recession since the 1930s. The risk is that it may also drive away America's largest creditors just as the Treasury relies more than ever on foreign investors to buy the bonds financing Barack Obama's stimulus spending. The US dollar's share of global currency reserves fell in the second quarter to 62.8 per cent, the lowest level in at least a decade, the International Monetary Fund in Washington said on Sept. 30.
``Since the (US) dollar has been weak and weakening for years, Geithner was using a code phrase, a carry-over from the Bush administration,'' said David Malpass, president of research firm Encima Global in New York. ``It means that the US approves of a constantly weakening dollar but doesn't want a disruptive collapse,'' said Malpass, the former chief economist at Bear Stearns Cos. and deputy assistant Treasury secretary from 1986 to 1989.
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