MercoPress. South Atlantic News Agency

Paulson forced to act says US supports “a strong dollar”

US Treasury Secretary Henry Paulson

A “strong' US dollar is in the US interest and it 'goes without saying' that the currency's value should be set by currency markets”, US Treasury Secretary Henry Paulson said on Friday ahead of this weekend's G20 meeting in South Africa.

"What I said yesterday was a strong dollar is in our nation's interest and I noted that our economy, like any other, goes through ups and downs, but that I believe ... that our economy is going to continue to grow and its fundamental long-term strengths will be reflected in currency markets", Paulson pointed out in a briefing to a select group of reporters in Cape Town. Asked about his decision to drop an earlier phrase that currency values should be "set" by the markets, Paulson said that "goes without saying". Earlier in the week Paulson's words led to certain controversy when some traders interpreted that it could signal the US might be preparing to intervene in currency markets to bolster the flagging greenback. Paulson said that when he talks about the US economy he always emphasizes its diversity. Though he tells people that housing is the biggest risk and credit markets are also a risk, it's more important that there is enough strength in the US economy for it to work through the housing issue. However he again warned that the mortgage and credit crunch is going to take "not weeks but months", and there will be more disclosures from financial institutions of their housing-related losses. Paulson then went on to praise African economies performance underlining that "increased foreign investment is the ultimate vote of confidence in the continent's economic future". Addressing the US-Africa Business Summit in Cape Town he said the formation of private equity funds focusing on Africa and the 90% growth of US direct investment in the continent over the last few years are signs of improvement. Africa's recent economic success, with GDP growth above 5 pct, dramatically lower inflation, more sustainable debt levels and record foreign exchange reserves are evidence that African economies can follow the same path toward development and away from poverty that China and India have pursued, Paulson said. Still, he urged African leaders to remain committed to sometimes difficult reforms, which "once started, have to be completed to realize their full potential".