WASHINGTON -- Maybe

the dollar-bashing in

foreign exchange markets is

not the big problem it is cracked up to

be.

Certainly, everyone seems to have

a different set of reasons to explain the

dollar's drop.

One explanation that circulated on

Wall Street trading floors was that

exchange markets lost confidence in

President Clinton's global leadership

abilities. The President, it was said,

was waffling on policy from Haiti to

Korea. One day he was risking war

with Pyongyang, and the next he was

tacitly supporting a weaker dollar to

wring trade concessions from Japan.

It is true that Clinton's aides did

not handle the jittery dollar with

polished international skills. When the

greenback got hammered in June and

the Bank of Japan kept intervening to

prop it up, U.S. voices were silent.

Then on June 24, when U.S.

authorities finally did coordinate a

central bank effort to buy dollars around

the globe, Treasury Secretary Lloyed

Bentsen's comments of support came

across as half-hearted and late. It was a

clumsy effort.

But blaming a rudderless White

House for the dollar's weakness

stretches the point. Governments of

other major industrial nations,

especially Japan, are weaker and hobbled

with problems of their own. In the case

of Japan, the election of a Socialist-led

government raises serious questions

about whether Tokyo will be able to

proceed with the tough task of creating

a consumer society open to U.S.

imports.

Moreover, in terms of the U.S.

economy, Clinton cannot be denied his

due for presiding over a healthy

expansion that has cut the unemployment

rate to 6% while businesses have

poured capital into plant and

equipment. At the same time, Clinton has

refrained from picking a fight with the

Federal Reserve while it raised interest

rates to contain inflation.

Barry Bosworth, an economist at

the Brookings Institution, says blaming

Clinton for the weak dollar is

misguided. "Nobody should have gotten so

excited by this effort by Wall Street to

sucker the government into thinking

this is somehow a vital economic

issue. What counts is to maintain the

U.S. economic expansion without

getting inflation, and in that sense things

look extraordinarily good," he said.

Bosworth believes the dollar's

weakness stems in part from

speculation about U.S. inflation and

uncertainty about how much the Fed will raise

rates. He and other analysts also cite

reports that Japan and Germany are

experiencing economic upturns,

stirring expectations that they will raise

their interest rates and attract capital

away from the U.S.

Japan's trade surplus, which

reached nearly $60 billion with the

U.S. last year, is part of the problem

because Japanese companies keep

piling up dollars earned abroad and

converting them into yen. As the price of

the yen is pushed up, Japanese

consumers are denied imports in a society

of regulated markets and business

cartels.

According to the textbooks, a weak

dollar adds to U.S. inflation by

boosting the cost of imports. But Japan

accounts for most of the U.S. trade

deficit. Against some major trading

partners, notably Canada, the dollar is

actually stronger.

Looking back over the last several

years, the dollar is not doing so badly.

The latest reading on the Fed's

tradeweighted index for the dollar, based on

trade with 10 major industrial

countries, is 89.62. That is close to the

readings of 89.84 in 1991 and 86.61 posted

in 1992.

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