Strong Dollar Is a Policy in Name Only

Most currency watchers disagreed with that assessment, preferring to give Snow the benefit of the doubt. Snow's "comments are meaningless [because] there's no policy associated with the mantra," said David Greenwald, a principal at Scalene Partners, a currency-focused hedge fund.

However, the bottom line is that currency traders import meaning to the mantra. The inescapable fact is O'Neill, Snow, former White House economic adviser Larry Lindsey (and others) veered away from the "strong dollar" mantra to varying degrees. Bush administration officials often have added something akin to "sound, pro-growth economic policies and a commitment to free and open markets are the foundation for a strong dollar," as Snow said during his Senate confirmation hearing in January. (Italics added.)

Such statements reveal the philosophical problem the politically conservative administration has with a policy that implies the threat of intervention.

In most instances, administration officials were compelled to clarify their statements as the dollar weakened, usually resulting in a terse reiteration of support for the strong dollar, as Snow offered Wednesday. The need for clarifications reveals the foreign exchange market's hypersensitivity to any perceived change in U.S. policy.

"If we tell foreigners 'we don't believe in defending the currency,' they sell. But between the lines, the attitude is an orderly decline is acceptable," Gilmore said.

But as the Bush administration is discovering, it's very hard to have it both ways.