Geithner Weak Dollar Seen as U.S. Recovery Route Versus BRICs

October 19, 2010 04:57

For U.S. Treasury Secretary Timothy F. Geithner, a weaker dollar may now be in the national interest.

By Ian Katz and Simon Kennedy – Oct 19, 2010 at


The dollar has dropped more than 7 percent since Aug. 27, when Chairman Ben S. Bernanke signaled the Federal Reserve is prepared to ease monetary policy.

“In an era where deflation pressures appear to be the greatest risk, growth is below trend and the U.S. wants to boost exports, why would they not want” a weaker dollar, Jim O’Neill, chairman of Goldman Sachs Asset Management in London, said in an interview.

The dollar is trading near parity against its Australian counterpart for the first time since 1983, and is close to its weakest versus the yen in 15 years.

“The dollar is going to go down,” Martin Feldstein, a Harvard University professor who was chief economic adviser to President Ronald Reagan, said Oct. 7 in a Bloomberg Television interview on “Surveillance Midday” with Tom Keene. “It will cause Americans to shift from imported goods into domestic services. All of that will strengthen the economy.”

A weaker dollar is “a positive for equities as long as it’s not viewed as a collapse of the dollar,” said Paul Zemsky, the New York-based head of asset allocation for ING Investment Management, which oversees $550 billion.

Even if the U.S. is not trying to push the dollar higher, “you can’t say that that amounts to having an active policy to drive down the dollar,” he said.

As long as the decline is “orderly, not negatively impacting U.S. asset prices — Geithner is quite happy with the depreciation in the currency,” said David Gilmore, a partner at Foreign Exchange Analytics in Essex, Connecticut.


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