The U.S. National Association of Manufacturers has urged President George W. Bush to address the strong dollar, fueling speculation over a shift in the U.S. foreign-exchange policy.

Noted U.S. economists, too, have voiced skepticism about the U.S. policy, calling for measures to drive down the dollar’s value and cut the bloated U.S. trade deficit.

Officials at the Treasury Department and the White House remain unmoved, however, reiterating that the United States remains committed to a strong-dollar policy.

Still, there is some confusion as to whether Washington favors a strong dollar or a stronger one.

A policy in support of a strong dollar does not necessarily mean Washington is aiming to guide the dollar still higher.

With hindsight, the U.S. Federal Reserve often intervened in the currency market when the dollar neared either end of the 85-100 range of its weighted average against a basket of other currencies.

When the dollar threatened to drop below the range, the Fed sold foreign currencies for dollars to keep the greenback from falling further.

Currently, the dollar’s weighted average is around 105, already well above the range it had over the past decades.

Even if the weighted average falls 10 percent to 95, the dollar is still close to the upper end of the range, indicating this much fall will be considered permissible even under the strong-dollar policy.

Washington appears to be aiming to guide the dollar lower tacitly against the euro in the months ahead.

While the yen will remain under downward pressure caused by Japan’s internal factors, the dollar could fall as much as 10 percent against the euro by year’s end.

In their relative strength against each other, the dollar is now stronger than the euro and the yen, and the euro is stronger than the yen.

If the U.S. succeeds in its aim, the relative strength could be reversed to the order of the euro, the yen and the dollar eventually.

In short, the euro appears likely to move between $0.86 and $0.95 in the months ahead while the dollar faces a 118 yen-130 yen medium-term range against the yen.

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