U.S. won't devalue dollar, Geithner says, overlooking last 97 years

Section:

By Jim Christie
Reuters
Monday, October 18, 2010

http://www.reuters.com/article/idUSTRE69H4VO20101018

PALO ALTO, California -- U.S. Treasury Secretary Timothy Geithner on Monday sought to ease fears the United States was actively weakening the dollar to gain an export edge, saying no country could devalue its way to health.

"It is not going to happen in this country," Geithner said of dollar devaluation to Silicon Valley business leaders here.

"It is very important for people to understand that the United States of America and no country around the world can devalue its way to prosperity, to (be) competitive," Geithner added. "It is not a viable, feasible strategy and we will not engage in it."

... Dispatch continues below ...



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Geithner broke his silence on the dollar's slide in recent weeks as the Federal Reserve considers more monetary easing. In response to audience questions from the Commonwealth Club of California, he said the United States needed to "work hard to preserve confidence in the strong dollar."

On Friday, the dollar index hit a 10-month low against a basket of major currencies, while the greenback has been plumbing fresh 15-year lows against Japan's yen. Many U.S. trading partners have expressed concerns that further money creation by the Fed will push the dollar down further.

Asked if the dollar would lose its status as the world's reserve currency, the Treasury chief said, "not in our lifetime."

Geithner said it was important for the United States to maintain growth, but also demonstrate that it could improve its long-run fiscal prospects and restore budget discipline.

The U.S. Treasury chief also reiterated his views that he believes China will continue to lift the value of its yuan currency to aid the rebalancing of its economy away from exports and toward domestic growth.

Asked how much higher China should allow the yuan to rise, Geithner said: "Higher."

"You can't know how far it should go. What you know now is that it's significantly undervalued which I think they acknowledge and it's better for them and of course very important for us that it move. And I think it's going to continue to move," Geithner said.

He added that he delayed a report on whether Beijing manipulates the yuan's value for trade advantage, saying he wanted to take advantage of upcoming meetings of the Group of 20 developed and emerging economies to build multilateral support for a China move on the yuan.

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