us treasury sacrifices dollar

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    America sacrifices dollar in dash for global growth
    From Gary Duncan in Deauville

    JOHN SNOW, the US Treasury Secretary, gave a further signal at the weekend that America is content with the dollar’s recent tumble on the foreign exchanges.
    In remarks that are likely to trigger further selling of the dollar in currency markets, Mr Snow appeared to water down Washington’s longstanding “strong dollar” policy.

    The Treasury Secretary played down the dollar’s slide of almost 10 per cent against the euro this year, taking it to a four-year low, as a “really fairly modest realignment”. He also declined to include the dollar’s exchange value among the qualities that defined its “strength”.

    Mr Snow’s comments came after finance ministers of the Group of Seven (G7) main economies met in Deauville, France. In what markets may also see as tacit G7 endorsement of the dollar’s fall, ministers omitted from their communiqué a standard pledge to monitor exchange rates and co-operate if action is needed.

    Asked to define what was meant by “strong” in the US dollar policy, Mr Snow said: “What you want to be strong is you want people to have confidence in your currency, you want them to see a currency as a good medium of exchange.

    “You want the currency to be a good store of value. You want it to be something people are willing to hold. You want it to be hard to counterfeit. Those are the qualities.”

    Pressed to say whether the dollar’s value against its rivals was also among the qualities defining a strong currency, Mr Snow declined to do so. He said: “That reflects the fundamentals of the demand and supply for currencies.”

    Pressure on the European Central Bank (ECB) to cut interest rates is mounting after data last week showed Germany’s economy shrinking and the eurozone near recession. Further gains in the euro will add to calls for ECB action.

    Gordon Brown hailed the weekend communiqué as “the strongest statement yet at a G7 on the need for reform”. He said: “Europe is facing up to the need for reform.”

    However, Mr Snow cited strengthening growth as the top priority. He said: “Growth in the major economies is simply not what it could be. We need to do more to ensure a robust recovery.”

    In contrast, eurozone ministers said all conditions were in place for a sustained upturn. Francis Mer, of France, said: “There is no reason . . . for our economies to remain durably sluggish. You may feel that is wishful thinking, but I do not really share that view.”

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