Treasury's O'Neill: Dollar Policy Unchanged

U.S. Treasury Secretary Paul O'Neill tried to stamp out market speculation that the administration is changing its strong dollar policy by reiterating on Wednesday that policy remained unchanged.

Earlier in the day, spokesmen for Treasury and the White House had also issued statements reaffirming the strong dollar policy.

"One of the things I've learned in this job is that there is no upside in talking about the dollar except to say we have a continuing, continuous policy" O'Neill said in an interview on CNBC.

"We've still got the same dollar policy," he added.

Markets had been speculating that the secretary would use his appearance on CNBC to change policy.

The comments came at particularly sensitive time for the U.S. currency.

On Tuesday, the International Monetary Fund warned that the unsustainability of the U.S. current account deficit raised the risk of a sharp dollar depreciation.

The dollar weakened significantly on the report to five-month lows against the euro and Swiss franc and fell against the Japanese currency to below the psychologically important 120-yen level.

But O'Neill offered some comforting words about the economy as a whole, predicting that the worst of the slowdown is now over.

"I think we've now put behind us seven months' worth of a correction process with inventories going down and I think we're now on the threshold of improvement," he said.

He said the United States should be able to look forward to higher rates of real growth.

"Hopefully moving forward into the fourth quarter and the first quarter of '02, we're going to move back more toward our real potential," he said.

At the end of July, the government said the U.S. economy grew at a paltry 0.7 percent annualized rate, its slowest pace since the first quarter of 1993.

SHEDS NO LIGHT ON ARGENTINA

O'Neill failed to offer any clarification of the U.S. position on whether to provide extra aid for cash-strapped Argentina.

"We have a natural interest aside from the bilateral U.S. concerns for Argentina and for the people of Argentina as we have this role as significant member of the IMF, and in that context we are paying day to day attention to the things that are going on," he said.

With 17.16 percent of the vote on the IMF executive board, the United States is the single largest shareholder.

O'Neill said he was confident that the economic policies put in place by Argentine President Fernando de la Rua and Economy Minister Domingo Cavallo will lead to "a sense of stability and the realization of growth potential."

He did not say whether he backs the extra funding that Argentine officials are seeking.

"The IMF has a lead role in dealing with international financial problems and I think we're appropriately involved," he said.

This comment appeared to be a reiteration of the belief that any funding that is given for Argentina should come through the IMF and not on a bilateral basis.