Paulson Says Dollar to Reflect Economy's `Long-Term Strength'

By Kevin Carmichael


Nov. 15 (Bloomberg) -- U.S. Treasury Secretary Henry Paulson expressed confidence that the dollar will rebound from record lows, reflecting the long-term strength of the world's largest economy.

``Our economy, like any other, goes through ups and downs,'' Paulson told reporters traveling with him to Cape Town, South Africa. ``But I believe the U.S. economy is going to continue to grow and its fundamental long-term strength is going to be reflected in our currency.''

Heading into a weekend of talks with finance ministry officials and central bankers from the Group of 20 countries, Paulson repeated his view that ``a strong dollar is very much in our nation's interest.''

``We are fortunate that we have a strong global economy and a healthy U.S. economy,'' Paulson said.

The Treasury chief is under pressure from European policy makers to stem the dollar's decline to a record low against the euro. The U.S. currency, down in four of the past five years, has dropped about 11 percent so far this year, based on the Federal Reserve's U.S. Trade-Weighted Major Currency Index.

The Treasury chief said he would be ``surprised'' if his colleagues didn't discuss exchange rates at the G-20 talks. China, along with countries such as France, the U.K. and Italy are all members of the group.

``I have followed the markets,'' Paulson said. ``I follow the press. I've heard what people are saying. I would expect that currencies will be one of the areas discussed.''

U.S.-Japan Talks

Paulson's comments echo words from President George W. Bush this week. In an interview broadcast on the Fox Business Channel Nov. 13, Bush said ``I believe the dollar will be stronger'' because of the health of the American economy. Bush reiterated the U.S. backing of a ``strong dollar'' and that markets should set exchange rates.

Bush meets tomorrow with Japanese Prime Minister Yasuo Fukuda in Washington.

European Central Bank President Jean-Claude Trichet last week called the euro's record-setting pace ``brutal.'' Paulson last week twice repeated the mantra followed by Treasury secretaries for 13 years that a ``strong dollar is in our nation's interest.''

Canadian Finance Minister Jim Flaherty yesterday said he has discussed ``currency issues'' with Paulson. He didn't elaborate on the details of the talks. The Canadian dollar has risen more than 18 percent against its American counterpart this year, hurting exports to the U.S., which accounts for a third of Canada's economy.

Paulson is in Africa on a six-day trip to Tanzania, Ghana and South Africa.