Fed leader says weak dollar is a 'stimulus'

By Craig Torres
Bloomberg News Service

Robert McTeer, president of the Federal Reserve Bank of Dallas, told the Rotary Club of Honolulu yesterday that a weaker dollar will benefit the U.S. economy.

McTeer

"The depreciation of the dollar in foreign exchange markets will provide stimulus to the economy," McTeer said. "A strong dollar has helped the standard of living of consumers. A weak dollar has helped your producers and exporters. It's been strong for a long time, and so probably a little relief is not a bad thing."

Yesterday, the yen climbed to as high as 110.90 per dollar, the strongest since Dec. 12, 2000, before falling back to 112.29 at 5:01 p.m. in New York. The yen lost ground amid speculation Japan will resume selling its currency to slow gains that threaten exporters' earnings.

McTeer said a depreciating dollar combined with low interest rates and tax cuts "will provide some stimulus to the economy."

"There is every reason to expect that the expansion that we have now will get stronger," McTeer said. "Hopefully, it will be strong enough to start cutting into the unemployment rate."

The U.S. economy shed 93,000 jobs last month. U.S. manufacturers have complained that currency policies, especially those of China, have reduced their competitiveness and have contributed to seven consecutive months of job losses.

The yen's 4.8 percent climb against the dollar since last Tuesday is the biggest six-day gain for Japan's currency since March 2002. The dollar weakened after Group of Seven said on Saturday that it wants more flexible exchange rates.

The Dallas Fed president, who did not speak from a prepared text, said he expected to see stronger hiring "in the next month or two."

Also, McTeer said that there is no national bubble in real estate prices, though some individual cities may have inflated housing values.

The state of Hawai'i may well have some of those communities, he said.