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To: Giordano Bruno who wrote (61674)	9/14/1999 11:38:00 AM
From: Les H	Read Replies (1) \| Respond to of 86076

Read my lips, "Strong Dollar" 04:47 p.m Sep 13, 1999 Eastern By Svea Herbst-Bayliss NEW YORK (Reuters) - Treasury Secretary Lawrence Summers has told financial markets to read his lips about America's strong dollar policy, but some traders are starting to worry they are getting a mixed message. The dollar has lost nearly 14 percent of its value against the yen since Summers took office in early July. Japanese monetary authorities have intervened repeatedly, but the Treasury's policy so far has been strictly hands-off. Summers dutifully repeats, when asked, that a strong dollar is in the U.S. interest because it keeps inflation in check -- last week he said the same thing on at least three separate occasions. Yet lacking action to back up his words, the strong dollar mantra appears to be losing its punch. ``Summers can come across the wires saying he favors a strong dollar as often as he wants. Right now, no one really believes him anymore,' said a dealer at a U.S. investment bank, asking to remain anonymous. Many are starting to suspect Summers may actually be leading a subtle policy shift aimed at letting the dollar weaken to help balance out a record trade deficit. ``The problem is that no matter what the administration favors, there is only so much it can or should do about the level of the exchange rate,' said Kathy Jones, currency strategist at Prudential Securities. A former economics professor, Summers may be taking a longer term view than his predecessor Robert Rubin, a former Wall Street trader who was highly popular with the market, say observers. ``He is not pounding the table with his view,' said Warburg Dillon Read strategist Tomas Jelf. Summers, as a trained economist, understands the potential impact of America's gigantic current account deficit and global economic recovery, he added. ``As the U.S. economy slows down and you continue to say strong dollar policy over and over again, you may look like a fool with that because the dollar is going to turn at one point,' Jelf said. In theory, a drop in the dollar may be inevitable if capital inflows, instrumental in financing America's current account deficit, begin to dry up. Both Japan and Europe are beginning to offer better alternative investment opportunities. The U.S. second quarter current account deficit is projected to be $78.9 billion. Now that long-absent signs of economic recovery are starting to emerge in Japan, dealers may be measuring Summers' performance with outdated tools, said Chase Securities analyst Harvey Chen. ``He is a different person. Rubin was much more in line with the markets' thinking, but Summers takes a more long-term view and so he should not be judged on a daily basis but rather as the long-term exchange rate equilibrium guy he is,' Chen said. Stronger-than-expected Japanese economic growth in the first half of the year has propelled the yen steeply higher against the dollar -- in stark contrast to last summer's yen slump. On Monday, the dollar fell to three-year lows against the yen near 106 yen, compared to the year's highs close to 125 yen. Japanese monetary authorities, meanwhile, have intervened at least eight times in foreign exchange markets to try to rein in the rampant yen since early June. But despite frequent speculation that Washington may join Tokyo in boosting the dollar against the yen, no cooperation has been visible. The last time the Treasury participated in an intervention was a year ago when it sold dollars for yen alongside the Japanese. In a broader context, however, the dollar's recent declines are not as dramatic as they appear at first glance. In fact, the dollar has made strides against Europe's new single currency and Swiss franc. ``The right way to look at the dollar is on a trade-weighted basis, not just against the yen. On that basis the change has been quite small, especially when compared with year-ago levels and even against the height of the dollar a few months ago,' J.P. Morgan analyst Jim McCormick said.