US Secretary of the Treasury John Snow said the Bush administration isn't trying to devalue the dollar to bolster the economy and it continues to believe a strong currency is in the best interest of the US.
The dollar dropped to a four-year low against the euro yesterday after Snow said on ABC's This Week Sunday that US "exports are getting stronger as a result" of the currency's 21 percent fall in the past year. Analysts said those comments indicated Snow accepted a weaker dollar as a way of boosting the US economy, which expanded at a 1.6 percent annual rate in the first quarter.
In his first public comments on the government's dollar policy since then, Snow on Tuesday said he wasn't trying to undermine the US currency's value in an effort to spark growth. He was testifying before the House Financial Services Committee.
"There's no conscious policy on the US's part to move the dollar at all," Snow said. "We have a strong dollar policy."
The former economics professor, who earned a doctorate studying under two Nobel-winning economists at the University of Virginia, said the link between a lower dollar and higher exports was basic economics. A weak currency makes US goods abroad less expensive.
"Clearly there is a relationship between exports and the exchange value of currencies -- that's Economics 101," Snow said.
He said the US wants a "currency whose value is set through an open competitive market process" and that he is reluctant to intervene in foreign exchange markets, signaling the Bush administration has no plans to purchase dollars to stop the US currency's slide against the euro and the yen.
"The relative value of currencies is one of the most complicated and unknowable phenomena in modern economic life," Snow said. While he said the US wants "people to have confidence in the currency," supply and demand will "dictate" its value, he said.
Economists said Snow's willingness to let markets operate free of government interference means the strong dollar policy amounts to little more than talk.
Eastman Kodak Co, International Business Machines Corp and 3M Co are among the US companies that reported higher first-quarter sales because of the currency's decline. In contrast, Europe's Volks-wagen AG and Nestle SA said the dollar's malaise is hurting them.
Snow told the congressional panel earlier he will use this weekend's meeting in Deauville, France of finance ministers from the G7 nations to urge them all to strengthen their economies.
"A healthy global economy needs multiple engines of growth," he said. "Our G-7 partners must immediately take their own steps, appropriate to their own circumstances, to spur growth and contribute to global prosperity."