Paulson backs strong dollar, plays down housing woes
Wednesday, 25 July 2007
WASHINGTON, July 24 (AFP): Treasury Secretary Henry Paulson expressed confidence yesterday in the dollar's prospects despite new highs notched up by the euro against the US currency.
In an interview with the CNBC financial news network, Paulson also predicted that problems afflicting the lower end of the US mortgage market would not infect the broader economy.
He said he felt "very strongly that a strong dollar's in our nation's interest and the dollar's value should be determined in a competitive marketplace based upon underlying economic fundamentals."
Paulson said he felt that way "about all currencies and again... I believe this country has very strong underlying economic fundamentals."
The high-flying euro briefly jumped to a new record against the dollar Monday on fears that a US housing market downturn could spread to the larger economy.
The single European currency at one point surged to a new high of 1.3845 dollars before falling back to 1.3811 dollars around 2130 GMT. Earlier the British pound had touched 2.0603 dollars, its highest reading since 1981.
Much of the dollar's plight is blamed on mounting losses in the market for "subprime" mortgages, which are awarded to people with poor credit histories, allowing them to buy homes that in many cases they cannot afford.
"You can't go through the kind of housing correction we've gone through without having some side effects that are going to go on for a good while," Paulson said.
"But do I think these risks are contained? Yes, I do," he added.
"I happen to believe that we are making a successful transition to an economy that was growing at a rate that wasn't sustainable to one that is sustainable."
In an interview with the CNBC financial news network, Paulson also predicted that problems afflicting the lower end of the US mortgage market would not infect the broader economy.
He said he felt "very strongly that a strong dollar's in our nation's interest and the dollar's value should be determined in a competitive marketplace based upon underlying economic fundamentals."
Paulson said he felt that way "about all currencies and again... I believe this country has very strong underlying economic fundamentals."
The high-flying euro briefly jumped to a new record against the dollar Monday on fears that a US housing market downturn could spread to the larger economy.
The single European currency at one point surged to a new high of 1.3845 dollars before falling back to 1.3811 dollars around 2130 GMT. Earlier the British pound had touched 2.0603 dollars, its highest reading since 1981.
Much of the dollar's plight is blamed on mounting losses in the market for "subprime" mortgages, which are awarded to people with poor credit histories, allowing them to buy homes that in many cases they cannot afford.
"You can't go through the kind of housing correction we've gone through without having some side effects that are going to go on for a good while," Paulson said.
"But do I think these risks are contained? Yes, I do," he added.
"I happen to believe that we are making a successful transition to an economy that was growing at a rate that wasn't sustainable to one that is sustainable."