There are growing calls in the United States, particularly from within the business community, for an end to Washington’s strong dollar policy.

Even Federal Reserve policymakers are blaming the strong dollar for the failure of U.S. monetary easing to have the desired reflationary effects on the economy.

The administration of President George W. Bush has insisted it will not change its strong dollar policy, however, so what is the likely outcome?

In London on July 24, U.S. Treasury Secretary Paul O’Neill said a strong dollar remains in the U.S. interest and that U.S. foreign-exchange policy is unchanged.

But his repeated mention of the strong dollar policy merely served to add to the impression that he is frantically resisting growing pressure to change it. And behind the scenes, he may well be preparing to do just that.

The strong dollar policy originated with the administration of former President Bill Clinton, made clear in the words of former Treasury Secretary Robert Rubin, who said, “A strong dollar is in the national interest.”

The strength of the greenback has aided the U.S. economy by checking inflation and increasing the costs for businesses of raising capital during the stock market boom.

But since the fourth quarter of 2000, when the economy began to decelerate, the strong dollar began to have an adverse impact on the economy as it weakened the export competitiveness of U.S. manufacturers and diluted the economic stimulus effects of monetary easing by the Federal Reserve.

The Republican administration of President Bush is in the so-called mainstream conservative camp: Although this group’s traditional image of the country is a strong America, it sees that as a natural product of industrial development and not something that should necessarily accrue from calling in capital.

As is clear from its policies toward China, the Bush administration is keen to show that its policies are different from those of its predecessor.

O’Neill said that when there is a shift in policy, he will book New York Stadium and announce it with a fanfare.

The possibility of change happening in the near future remains uncertain, but there is a chance that Bush will be doing the announcing for him.

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