Watanabe Says Dollar Intervention an Option to Fight Inflation
Japan's former top currency official Hiroshi Watanabe said governments would be “foolish'' to rule out intervening to strengthen the dollar because it may help to contain inflation.
“Currency intervention is certainly a tool to fight inflation of imported goods when monetary policy can't stop it,'' Watanabe said today in an interview in Jeju, South Korea, where he is attending a meeting of Asian and European finance officials. “Governments would be foolish to omit that option.''
Finance ministers including France's Christine Lagarde and Russia's Alexei Kudrin said at a Group of Eight meeting on June 14 that a higher dollar would help tame accelerating inflation caused by record oil and raw-materials prices. A stronger dollar would reduce the incentive for investors to buy raw materials priced in the currency as a hedge against its decline.
U.S. Treasury Secretary Henry Paulson last week said intervention is “never off the table'' and he supports a “strong'' dollar. The U.S. currency has slumped 5.3 percent against the euro and 2.2 percent versus the yen this year faxless payday loans cash advance usa.
“If the dollar enters freefall, that wouldn't be good for anybody,'' Watanabe said. “If other nations recognize it, they will move together'' to buy the currency, he said.
The dollar traded at 1.5401 per euro as of 2:22 p.m. in Tokyo from 1.5380 late June 13. The U.S. currency was at 108.23 yen from 108.19.
Japan's Finance Minister Fukushiro Nukaga said G-8 finance chiefs didn't talk about joint intervention in the currency market at the June 13-14 gathering that he hosted. Nukaga yesterday declined to say whether he supports a stronger dollar.
Watanabe, currently a professor at Tokyo's Hitotsubashi University, stepped down as vice finance minister for international affairs last year. In his two-year tenure, Watanabe never stepped into the market to sell or buy currencies.