Summers vows to continue strong dollar

Henry C.K. Liu hliu at mindspring.com
Sun May 16 20:44:54 PDT 1999


Monday May 17 1999 SCMP

Strong US dollar vowed

BARRY PORTER in Langkawi

United States Treasury Secretary-designate

Lawrence Summers has reassured financial

markets the centrepiece of US economic policy

- a strong dollar - will remain when he takes

over the reins from Robert Rubin in July.

"As Secretary Rubin and I have both said

many times, a strong dollar is very much in

America's national interest," he said.

Financial Secretary Donald Tsang Yam-kuen

yesterday welcomed the news, even though a

weaker US dollar would help restore the SAR's

lost competitiveness because of the Hong Kong

dollar peg.

"I think it is good news. I want to see a stable

US dollar," Mr Tsang said.

There had been concerns Mr Summers, now

deputy treasury secretary, may not turn out to

be as vocal a proponent of a strong US dollar

as his boss.

In his previous career as an academic, Mr

Summers published a number of articles and

books favouring the idea of trying to talk the

dollar's value down to help reduce trade

deficits, particularly those with Japan.

But Mr Summers, nominated for the top

treasury job by US President Bill Clinton last

week, yesterday insisted those were no longer

his views.

"Mr Rubin and I have seen in the same way

for many years," said Mr Summers, standing in

for Mr Rubin at a summit of Asia-Pacific

Economic Co-operation forum finance

ministers on the Malaysian resort island of

Langkawi.

"We believe that a strong dollar is very much

in America's national interests," he said.

"The dollar cannot and should not be a tool of

trade policy. Experience suggests that nations

cannot devalue to gain prosperity."

The strong dollar policy advocated by Mr

Rubin has widely been seen as a key factor in

the recent strong performance of the US

economy, by helping to keep inflation and

interest rates down.

A weaker dollar makes US exports cheaper

abroad while raising the price of imports,

which risks fuelling inflation.

Conversely, a stronger dollar makes it cheaper

for US companies and consumers to buy

foreign goods. That keeps import prices down

but has contributed to a ballooning US trade

deficit with the rest of the world, particularly in

recent years.

Japan's Vice-Finance Minister for International

Affairs Eisuke Sakakibara said Tokyo would

also be seeking to maintain its yen-dollar policy

through the transition.

"Just because the person is changing, you

cannot change the policy," Mr Sakakibara said.

Tokyo has recently favoured exchange-rate

stability above all else, believing excessive yen

strength to be undesirable at this stage for a

Japanese economic recovery.

The US dollar's continuing strength means the

Hong Kong dollar will also remain expensive

compared with many of its trading partners,

but Mr Tsang yesterday stressed the SAR's

other achievements towards regaining lost

competitiveness.

"Now wages have gone soft, rental values have

come right down and the cost of capital has

been moderating. You have to look at how

quickly the Hong Kong economy has been

adjusting," he said.

Mr Tsang also expressed hope that Mr

Summers' appointment would not impact on

the mainland's expected early entry into the

World Trade Organisation.



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