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Thu, Aug 03, 2006 - Page 10 News List

Paulson sticks to `strong dollar'

COLOMBIA SPEECH The new US treasury boss said he believed in open markets determining currency values. Earlier he had criticized Beijing's exchange rate policy

AFP , NEW YORK

US Secretary of the Treasury Henry Paulson walks off stage after addressing the Columbia Business School on the campus of Columbia University in New York on Tuesday.

PHOTO: EPA

Newly minted US Treasury Secretary Henry Paulson said on Tuesday in his first public comments since assuming office last month that a "strong dollar" was in the US' best interests.

Paulson picked up the baton right where his predecessor left off in stating his adherence to a strong US dollar in a speech at New York's Columbia University.

"I believe that a strong dollar is in our nation's interest and that currency values should be determined in open and competitive markets in response to underlying economic fundamentals," Paulson said, according to a transcript.

The US dollar has weakened in recent weeks due to mounting concerns about US economic growth and because some traders believe the Federal Reserve's rate-hiking cycle is near its peak.

Paulson also echoed former treasury secretary John Snow and senior US lawmakers in criticizing the Chinese government's currency regime in an interview with the CNBC business channel shortly before his speech.

Snow criticized Beijing for its slow pace of currency reform, and US lawmakers regularly claim that China fixes its exchange rate to give it an unfair export edge.

"The Chinese need to show more flexibility with their currency," Paulson told CNBC after a tour of the New York Stock Exchange trading floor.

Paulson said in his speech that the US economy was "transitioning to a more sustainable rate of growth," after GDP slowed to a weaker-than-forecast 2.5 percent in the second quarter from a 5.6 percent clip in the first quarter.

He warned that the biggest economic problem facing Washington was spending on federal entitlement programs, but also voiced concern over the recent collapse in the "Doha Round" of world trade talks.

Paulson said he would travel to Asia in the autumn and that trade issues would likely top his agenda.

"I am very concerned about the anti-trade rhetoric I hear coming from some quarters here and around the world," he said.

He added that the world's citizens would benefit greatly from freer trade.

"I have seen this mindset paralyze the Doha Round of global trade negotiations," he said.

The Doha Round is on life support after a meeting of six key players, including the US and the EU, collapsed late last month, largely because of disputes over farm payments.

US trade negotiators are fearful that a Doha Round deal might not be struck before the government's trade promotion authority expires.

The White House's congressional mandate to negotiate such deals expires on July 1 next year, whereupon the US Congress will regain the right to amend trade agreements, leaving any Doha agreement hostage to US vested interests.

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