*EPF318 05/14/2003
U.S. Denies Intent to Defend Value of Dollar
(Governments should not intervene in currency markets, Treasury's Snow says) (470)

By Andrzej Zwaniecki
Washington File Staff Writer

Washington -- U.S. Secretary of the Treasury John Snow says the Bush administration has no plan to defend the dollar from recent declines in global currency markets.

"There is no conscious policy on the part of the United States to move the dollar at all," Snow reportedly said answering a question during May 13 testimony before the House of Representatives Financial Service Committee.

Nevertheless, he reaffirmed Bush administration support for a "strong dollar policy" and, referring to Treasury secretaries in the two Clinton administrations and his direct predecessor in the Bush administration, said "we have had it forever, in this administration and the prior administrations," according to news reports. No transcript of the testimony is currently available.

On May 13 Snow said in a TV program that a weaker dollar helps American companies compete internationally. Currency market analysts and currency traders interpreted his statement as indirect Bush administration support for dollar depreciation. The value of the dollar has declined by more than 11 percent against the Japanese yen this year, while the 12-nation European currency has risen 30 percent against the dollar during the same period. On May 12 the dollar fell to a four-year low against the euro despite reassurance from the Treasury spokesman that "the dollar policy remained unchanged."

Snow said that governments have little ability to control the value of their currencies and should not try, but rather rely on the markets to set a value.

"When a currency is propped or suppressed it introduces a lot of negative conduct and behaviors into the economy," Snow reportedly said.

When governments believe that the value of their currencies does not reflect market fundamentals, they may buy or sell currencies to increase or decrease this value.

"We want the currency set through the open and competitive markets with interventions kept to a minimum," Snow reportedly said. "That sort of regime will serve the best long-term interests of the United States."

Snow made these comments just ahead of a May 16-17 summit of finance ministers from the Group of Seven (G-7) countries -- Canada, France, Germany, Italy, Japan, the United Kingdom and the United States.

Snow said he would emphasize to his counterparts that each G-7 country needs to contribute to the global economic expansion.

"What I will try to urge my brethren in the G-7 is that we have a concerted effort to promote growth," he reportedly said.

In his prepared remarks he said that he has underscored that "our G-7 partners must immediately take their own steps, appropriate to their circumstances, to spur growth and contribute to global prosperity."

(The Washington File is a product of the Bureau of International Information Programs, U.S. Department of State. Web site: http://usinfo.state.gov)

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