By Steven K. Beckner

(MNI) - The old Treasury boilerplate language on the dollar seems to have outlived its usefulness.

Dating back to when Robert Rubin took over from Lloyd Bentsen during the first Clinton administration, whoever the Secretary of Treasury has been has intoned that "a strong dollar is in the U.S. interest."

The phrase was used ad nauseum by Rubin, by his successor Lawrence Summers, by three Treasury Secretaries in the Bush administration -- Paul O'Neill, John Snow and Henry Pauslon, and until very recently Timothy Geithner.

But increasingly, the assertion that "a strong dollar is in the U.S. interest" had come to be regarded as almost laughable in certain very important quarters, given that the dollar has been on a steady downtrend throughout this year.

"Benign neglect" was the caustic term that many have applied to the U.S. policy of talking "strong dollar" while the dollar sank. As Philadelphia Federal Reserve Bank President Charles Plosser, among other officials, noted in an interview with MNI, the dollar is still not back down to pre-crisis levels. Its recent slide is largely a retracement of its previous sharp climb brought about by the "flight to quality" during the financial crisis.

But that fact hasn't stopped a host of foreign officials from griping about dollar depreciation.

Complaints about dollar weakness have come from China, from the Middle East and from Europe.

Even European Central Bank President Jean Claude Trichet got into the act last month, declaring that "excess volatility and disorderly movements in exchange rates have adverse implications for economic and financial stability." And Trichet added that the ECB stood ready to "cooperate as appropriate."

There was no doubt which currency he was talking about.

Following the Oct. 3 Group of Seven meeting in Istanbul, Geithner began moving away from the old boilerplate, telling a press conference, it is "very important for the United States ... to have a strong dollar." He added that it is a "special burden and responsibility" of the U.S. to have a strong currency.

And he vowed, "We are going to do everything we can do to sustain confidence" in the greenback, including running a sound monetary policy and bringing the federal budget "back into balance as soon as possible as we get out of the crisis."

Then this Wednesday in Tokyo, following a meeting with Prime Minister Yukio Hatoyama and Japanese Finance Minister Hirohisa Fujii, Geithner again tweaked his dollar-speak in a briefing for the Japanese press.

"I believe deeply that it's very important to the United States, to the economic health of the United States, that we maintain a strong dollar." Geithner was quoted as saying, adding that the U.S. has "a special responsibility" to pursue policies that "sustain confidence" among global investors -- namely by cutting the $1.4 trillion federal budget deficit.

Thursday in Singapore, Geithner went further at a joint press conference with finance ministers at the 21-member Asia-Pacific Economic Cooperation (APEC) forum.

"It is very important to the United States that we have a strong dollar, that we continue to focus on improve our fundamentals, that we sustain confidence not just in the stability of our financial system but in our capacity as a country, as growth recovers, to move our fiscal position back to balance," Geithner said.

"We recognize that given the very important role of the U.S. in the global economy, the important role the dollar plays in the system, we are going to continue to be a voice for reform and will be a strong partner to the countries in this region," Geithner added.

There has been no indication so far, however, that Geithner is prepared to back changes in rhetoric with changes in the Treasury's non-interventionist dollar policy.

A depreciating dollar helps U.S. net exports, and that has one of the few effective sources of economic stimulus. What's more, the dollar's weakness has not thus far been perceived as a source of inflation.

Nonetheless, the Treasury has never ruled out foreign exchange intervention. If currency markets were to become "disorderly" and potentially disruptive of broader financial markets and/or if the Europeans and G-7/G-20 partners were to make a strong appeal to the U.S. to join with them in coordinated intervention, joint action is not inconceivable.

** Market News International **