NEW YORK, Dec 9 (Reuters) - U.S. officials may be backing
off their long-held ''strong-dollar'' policy, fueling market
expectations that the greenback will linger near its recent lows against the Japanese yen.
Japan's Finance Minister Kiichi Miyazawa on Wednesday told parliament Washington is concerned about the ever-widening U.S. trade shortfall and may seek to weaken the dollar to narrow that
deficit.
''He's being very honest and I think he's right. I suspect U.S. authorities may have already made a quiet policy shift to seek a weaker dollar rather than a strong dollar,'' said Takanobu Igarashi, an economist at Sanwa Bank Ltd. New York.
The dollar fell nearly two yen to as low as 117.55 yen in Wednesday trading, and dealers cited Miyazawa's comment that U.S. leaders were comfortable with a rate between 110 and 120.
That's a far cry from the dollar's eight-year high at 147.65 yen reached in August.
''Miyazawa may be attempting to influence traders by saying 'If the dollar goes outside that range, the Japanese government could intervene''' to keep it there, said Arthur Alexander, president of the
Japan Economic Institute of America, a Washington think-tank partly funded by Japan's Foreign Ministry.
U.S. Treasury Secretary Robert Rubin, who engineered the dollar's rebound from post-World War II lows in 1995, has repeatedly denied any shift in policy.
Rubin rarely misses an opportunity to reiterate that a strong dollar is in the United States' interest, though he has at times said he shared Japan's concern over the yen's weakness.
Rubin's support helped reverse a slide that began under his predecessor, Lloyd Bentsen, who triggered massive dollar sales by saying a weak dollar might make U.S. goods cheaper to buy
overseas, stimulating U.S. exports.
But Rubin was noticeably quiet during the greenback's plunge this fall. After joining Japanese authorities in intervening to push the dollar off a June high at 146.75 yen, U.S. officials watched
silently as the dollar fell from 136 yen to 111.33 yen between October 5 and October 8.
The dollar has since stabilized, generally trading between 115 yen and 125 yen. U.S. officials made no immediate comment on Wednesday.
The U.S. Commerce Department on Wednesday reported the deficit in the current account -- the broadest measure of U.S. trade -- widened 8.1 percent to a record $61.3 billion in the third quarter from the second quarter.
Economists have long expected that the huge flow of dollars into world currency markets as the United States continues to import far more than it exports must eventually weigh down the greenback's value.
''We have to wait for the U.S. economy to get much weaker as U.S. exports get significantly worse, but that time will surely come. Exports have already declined to Asia and Japan and now they are
declining to Latin America,'' Igarashi said.
As the global economic slowdown drags on into 1999, demand for U.S. products is expected to weaken, pushing U.S. economic growth below 2 percent annualized in early 1999 from 3 to 4 percent in late 1998.
But a weaker dollar might exacerbate global problems, even as it temporarily improves the U.S. trade outlook.
Many Asian nations, for example, find it easier to export when the dollar is strong, said Bob Sinche, currency strategist at Citibank.
''I think the bigger U.S. concern is getting the entire economic pie to grow faster rather than divvying it up differently by shifting exchange rates,'' he said.
Sinche agreed that the dollar is likely to keep falling against the yen, but more because a recent rise in Japanese interest rates has made investment in yen-based assets more attractive than because of
exchange rate manipulation.
''Artifical strengthening of the yen would be counterproductive for Japan and the rest of the globe and I think (U.S. officials) realize that,'' he added.
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