United States Treasury Secretary Henry Paulson weekend statements in support of a strong dollar don't seem to have convinced markets as the greenback looks ready to slide past a two year low against the Euro.
The Euro was trading in Tokyo's Monday session in the range of 1.36 US dollars, very close to the 1.3668 of last Friday and its record of 1.3666 from December 30, 2004. "As I think you know, I believe very strongly that a strong dollar is in our nation's interest" Paulson said in an interview late Friday with PBS television. His comments came after European Central Bank President Jean-Claude Trichet reiterated Friday that excessive exchange rate volatility was "undesirable," as the euro flirted with all-time highs against the dollar. Paulson said the dollar's value is set in a competitive marketplace based on underlying U.S. economic fundamentals. Paulson also called for China to let the Yuan appreciate more against the dollar to ease protectionist tendencies in Congress amid a persistent U.S. trade deficit with China. Congress could pass "unattractive bills," he warned, adding, "I think the Chinese are very well aware of it." "China needs to allow more appreciation and flexibility in the Yuan's value in the short term as it moves towards a point when the currency can be set in a competitive marketplace", he said adding that "it's a bit unnatural to be as integrated as they are, in terms of goods and services, and not be there yet with the currency". European Central Bank President Jean-Claude Trichet meeting in Berlin over the weekend with Euro zone finance ministers described Mr. Paulson's remarks "as interesting". "We have noted with interest that the Secretary of Treasury and U.S. authorities have said a strong dollar is in the interest of the U.S. economy" Trichet underlined. However when asked if his concern about the dollar exchange rate had increased in the last week, Trichet said, "It is not a new line".