Paulson Wouldn't Rule Out Intervention to Help Dollar

U.S. Treasury Secretary Henry Paulson Monday declined to rule out intervening in currency markets to stabilize the dollar, but said strong long-term U.S. economic fundamentals would "shine through" in the dollar's value. (See video below)

"I would never take intervention off the table or any policy tool off the table." Paulson said in an interview on CNBC. "I just can't speculate about what we will or won't do."

Henry Paulson
Henry Paulson

Paulson's comments come ahead of the U.S. Treasury chief's visit to Japan this week to meet with financial chiefs from the Group of Seven nations.

The issue of whether to intervene in currency was not only a topic for Paulson to tackle, but came amid other comments on the subject by two Federal Reserve officials and President George Bush.

Paulson also said record oil prices were "a problem" for the U.S. economy. "There's nothing welcome about it and it's a real headwind," he added.

Paulson said tax rebates of up to $600 per adult and $300 per child would help the U.S. economy, even if a significant portion is spent on purchases of dramatically more expensive gasoline.

"I'm a glass-half-full person," he said. "If we hadn't had that stimulus check coming, it would be much tougher for the American consumer."

He added, the U.S. will have jobs it wouldn't have had without the stimulus checks.

He repeated his view that the rise in oil prices is due mainly to increasing global demand, supplies that have not expanded, and recent volatility in supplies.

Paulson welcomed a call by top global exporter Saudi Arabia for a summit between oil producing and consuming countries to discuss what it calls an unjustified rise in oil prices.

"It's got to be constructive, so I welcome it, but again, I think that the solutions to the big problem are longer-term solutions, in terms of investing in supply and alternative sources of energy," he said.

"It can only be good news to talk about this issue."

In a separate interview on CNBC, Dallas Federal Reserve Bank president Richard Fisher agreed that currency intervention remains on the table, but did not elaborate.

Fisher said he's most concerned with keeping inflation under control, which he said is imperative for sustainable growth. He said a "tectonic change" that has come over the global economy has made inflation a much bigger challenge, very quickly.

"This is something we're going to have to deal with for quite a while," Fisher said.

In addition, New York Federal Reserve President Tim Geithner who told the New York Economic Club that no central bank can be indifferent to its currency's value.

Fed Chairman Ben Bernanke rattled financial markets last week by telling an international financial conference in Europe the U.S. central bank and Treasury were monitoring currency markets "in collaboration," which briefly braced the dollar.

However, later in the week European Central Bank President Jean-Claude Trichet hinted at hiking interest rates, effectively kicking the feet from under the U.S. currency's rally and raising questions about what message financial markets were supposed to take.

Paulson said on CNBC that he had "obviously noticed" Trichet's comments but refused any further comment.

The dollar rose against the euro and yen after Paulson refused on Monday to rule out intervention. There has been no intervention in currency markets by the United States since the Bush administration took office in January 2001.

-Reuters contributed to this report.