Strong Dollar Is a Policy in Name Only

Other than "I love you" and "You're under arrest," few three-word English phrases have as much significance as "strong dollar policy."

The strong-dollar mantra seemingly served the country very well in the latter half of the 1990s, although lately it has become something of an albatross. While the Bush administration probably would prefer a softer dollar, which would help U.S. exporters, it can't publicly abandon the so-called strong dollar policy without risking a run on the currency, if not an outright crash.

"With a $500 billion-a-year current account deficit, you're forced to have a strong dollar policy," said David Gilmore, a partner at Foreign Exchange Analytics. "If you suddenly say 'we want a weaker dollar,' you'll get there in a hurry and it's going to feed on itself. You may end up with a vortex of dollar selling." ...