By Agency Reporter

Monday, 8 Nov 2010

Kyoto: Treasury Secretary, Mr. Timothy Geithner, said United States would not use the dollar as a trade weapon, reiterating support for a “strong dollar” that plays a central role in the global economy, Bloomberg reported on Saturday.

“We will never use our currency as a tool to gain competitive advantage,” Geithner told reporters on Saturday after a meeting of finance ministers from the Asia-Pacific Economic Cooperation group in Kyoto, Japan.

The Treasury chief said he believed the dollar, euro and yen were roughly in alignment with one another.

He said American policy makers understood the “special responsibility” the US had for the world economy. ”I‘m happy to reaffirm again that a strong dollar’s is in our interest as a country,” Geithner said.

Officials in China, Germany and Brazil, during the week, had criticised the Federal Reserve‘s plan to pump $600bn into the US economy, saying it might hurt other economies without helping the US grow again.

Critics, including Michael Burry, the former hedge-fund manager who predicted the housing market‘s plunge, have said Fed policy is encouraging investors to take on too many risks, which ‘threaten’ to undermine the dollar.

Fed Chairman, Ben Bernanke on Friday told college students in Jacksonville, Florida, that ”the best fundamentals for the dollar will come when the economy is growing strongly.” Geithner declined to comment on the US monetary policy stance, saying, “Today, the US has an ”independent” central bank.

Geithner said the US economy was benefitting from gains in the private-sector hiring, productivity and business investment. These trends, along with a Labour Department report on Friday, showed that the US economy added 151,000 jobs last month. This, he said, showed that the US had a very good chance of continuing to grow and to recover fully from the financial crisis.”

Major emerging market economies ”are in the early stages of a very long period of very strong growth in productivity and living standards – that‘s a very encouraging thing for the world,” the US Treasury chief said. He said this growth, particularly compared with slower growth in the US, Japan and Europe, meant these emerging market nations could expect capital investment to continue.

“You can have too much of a good thing, but it is fundamentally an encouraging thing,” Geithner said. “What is driving the flows of capital you‘re seeing into emerging markets is fundamentally a positive reflection of confidence in the likely trajectory of growth rates in those countries over time.”

Geithner said international efforts to rein in trade surpluses and deficits needed to be sensitive to the economic and political pressures facing emerging-market nations in the midst of this growth. At the same time, he said the trends gave countries incentive to allow currency appreciation.

“Fast-growing developing nations recognise that it is important for exchange rates to move in line with economic fundamentals, ”because if you don‘t those pressures don‘t go away, they‘ll just end up somewhere else, in the risk of higher inflation, higher asset price bubbles and greater risk to the sustainability of growth,” Geithner said.

 

Source: Punch