US's Paulson won't rule out intervention on dollar. I'll have a look at CAD AUD for Elroy...
U.S. Treasury Secretary Henry Paulson refused on Monday to rule out intervening in currency markets to stabilize the dollar, but said the U.S. economy's long-term strength will "shine through" in the dollar's value.
"I would never take intervention off the table or any policy tool off the table," Paulson said in an interview with CNBC television. "I just can't speculate about what we will or won't do."
The U.S. Treasury chief, who heads for Japan this week to meet fellow Group of Seven financial chiefs from rich nations, did back-to-back interviews on CNBC and CNN television to face questioning about the dollar's plunge and soaring oil prices.
He said the Bush administration was "focused" on both the dollar and on oil prices, which hit a record on Friday before easing on Monday.
Financial leaders from the G7 -- the United States, Britain, Canada, France, Germany, Italy and Japan -- as well as Russia meet in Osaka, Japan on Friday and Saturday to discuss the global economy.
Paulson's comments on the dollar were reinforced separately by New York Federal Reserve Bank President Tim Geithner who told the New York Economic Club that no central bank can be indifferent to its currency's value.
BRIEF DOLLAR REPRIEVE
Fed Chairman Ben Bernanke rattled financial markets last week by telling an international financial conference in Europe the U.S. central bank and Treasury were monitoring currency markets "in collaboration," which briefly braced the dollar.
However, later in the week European Central Bank President Jean-Claude Trichet hinted at hiking interest rates, effectively kicking the feet from under the U.S. currency's rally and raising questions about what message financial markets were supposed to take.
Paulson said on CNBC that he had "obviously noticed" Trichet's comments but refused any further comment.
The dollar rose against the euro and yen after Paulson refused on Monday to rule out intervention. There has been no intervention in currency markets by the United States since the Bush administration took office in January 2001.
Speaking at an investment summit in New York sponsored by Reuters, analysts said the fact that central bankers were speaking about the dollar -- normally exclusively the Treasury's purview -- was significant and underscored their concern that a cheapening dollar risks firing inflation.
"When Fed officials use the word 'dollar,' they mean it," said Lou Crandall, chief economist at Wrightson ICAP LLC.
MESSAGE GETS DILUTED
But he cautioned that if too many Fed officials began stating their own opinions on the dollar, it could send confusing signals to investors who are trying to cope with what Bernanke and Trichet intended last week.
Paulson conceded that record oil prices and $4-a-gallon gasoline were "a problem" for the U.S. economy but blamed it on supply and demand and declined to blame speculators for playing a role in soaring prices.
"My position, and I've looked at this very carefully, is I don't believe financial investors are responsible to any significant degree for this price movement," Paulson said on CNN.
He welcomed a call by top global exporter Saudi Arabia for a summit between oil producing and consuming countries to discuss what it calls an unjustified rise in oil prices.
"It's got to be constructive, so I welcome it, but again, I think that the solutions to the big problem are longer term solutions, in terms of investing in supply and alternative sources of energy," he told CNBC. "It can only be good news to talk about this issue."
Paulson said tax rebates of up to $600 per adult and $300 per child would help the U.S. economy, even if a significant portion is spent on purchases of dramatically more expensive gasoline.
"If we hadn't had this stimulus check coming, it would be much tougher on the American consumer," he said. (Additional reporting by Emily Kaiser) (Reporting by Glenn Somerville and David Lawder; Editing by Tom Hals) |
