Yellen, U.S. Treasury: "Strong Dollar Reflects Appropriate U.S. Policy"

Janet Yellen, U.S. Secretary of the Treasury, is speaking at the Korea-U.S. Treasury Ministers' Meeting held at Lotte Hotel, Sogong-dong, Jung-gu, Seoul, last July. Photo by Kim Hyun-min kimhyun81@

[Asia Economy Reporter Lee Chun-hee] Amid the ongoing 'strong dollar' phenomenon caused by the aggressive interest rate hikes by the U.S. Federal Reserve (Fed), U.S. Treasury Secretary Janet Yellen expressed support for this trend.

According to Bloomberg on the 11th (local time), Secretary Yellen said in a broadcast interview that when asked about the possibility of authorities intervening to prevent further appreciation of the dollar, "The dollar value determined by the market aligns with the interests of the United States," adding, "The movement of the dollar is a logical result of differing policy stances across countries."

Regarding concerns that the strong dollar phenomenon would increase debt repayment burdens for emerging countries, she stated, "The strength of the dollar reflects appropriate U.S. policies," and explained, "Because the dollar is a safe asset, capital flows into the safe U.S. market during uncertain times," which causes the dollar's value to rise against foreign currencies.

These remarks reinforce the outlook that despite the upcoming International Monetary Fund (IMF) and World Bank (WB) joint annual meetings in Washington DC this week, where finance ministers and central bank governors from various countries will gather, the possibility of international cooperation on exchange rates is low. Fed officials have also recently indicated that despite global recession concerns, the Fed will continue monetary tightening as it remains focused on the U.S. economy.

As inflation in the U.S. showed little sign of easing, the Fed executed a 'giant step' of raising the federal funds rate by 0.75 percentage points for three consecutive times on the 21st of last month (local time). Currently, the federal funds rate stands at 3.0?3.25%, marking the first time in 14 years since 2008 that it has reached the 3% range. The Fed has also hinted at the possibility of an additional 1?1.25 percentage point increase within this year.

Meanwhile, Secretary Yellen said in the interview that despite global economic uncertainties, the U.S. economy is performing very well, and recent employment figures demonstrate the resilience of the U.S. economy. She also emphasized that price stability is a top priority for the U.S. administration and commented on the recent turmoil in the U.K. economy, stating, "When monetary policy is tight, it should be complemented by fiscal policy."

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