US Treasury Secretary Paul O'Neill startled the markets yesterday as he appeared to back away from a strong dollar policy on the eve of his first G7 meeting.
The dollar dropped sharply in response, one day before the Group of Seven meeting in Palermo, Sicily, where Mr O'Neill must confront fears of a global slowdown caused by the stuttering US economy.
"We do not lead, contrary to what is often said, a strong dollar policy. In my opinion, a strong dollar is the result of a strong economy," Mr O'Neill told Frankfurt's Frankfurter Allgemeine.
The euro swiftly jumped to 0.9120 dollars in London, up from 0.9047 dollars in New York late on Thursday.
In an effort to calm the markets down, a Treasury spokeswoman said yesterday that Mr O'Neill had not changed policy on the dollar. "There has been no change in policy. The secretary still supports the strong dollar," she said.
But Italian Treasury Minister Vincenzo Visco said Palermo in a press conference ahead of today's meeting that the ministers would not specifically address the issue of currency markets.
