WASHINGTON, May 31: A revamped and resolutely hands-off attitude within the Bush administration toward dollar policy appears designed in part to pressure industrial allies in Europe and Japan to step up the pace of economic reform.

As President George W. Bush prepared for a weekend summit with Group of Eight allies in Evian, France, he said he will assure them the United States has a strong-dollar policy, something they want to hear.

But Bush’s insistence that markets should determine currencies’ value also underlined a US view that government intervention is not an effective way to reinvigorate a struggling global economy and that reforms are overdue.

We believe that correct financial policies will lead to growth in the economy and that the market will respond to economic growth by strengthening the dollar, Bush said on Russian television on Friday.

As for complaints that a slumping dollar is hurting allies’ economic prospects by making their exports more costly in US markets, Bush gave scant shrift to any hopes he might entertain thoughts of intervention to help them.

I understand that the market itself decides how strong it will be, and our goal is a strong dollar, Bush said.

The Evian meeting brings together political leaders from the United States, Britain, Canada, France, Germany, Italy, Japan and Russia.

The Bush administration initiated a shift in its dollar policy in recent weeks during a series of calibrated remarks by Treasury Secretary John Snow, who said in Deauville, France, two weeks ago that value was not one of a series of qualities that he saw defining a strong dollar.

His comments, after a meeting of finance ministers from the same industrial powers represented at the Evian summit, amounted to an effective scuttling of verbal support for the dollar.

This was further emphasized by Snow’s observation that he considered the dollar’s slide against the euro and yen as a “fairly modest” currency realignment.

As for value: That reflects the fundamentals of the demand and supply for currencies, the US Treasury chief said.

That was a departure from rhetorical backing for the dollar developed to an art form in the mid-1990s, when former Treasury Secretary Robert Rubin coined the phrase a strong dollar is in the US interest and repeated it endlessly through the boom years of the decade as the dollar soared in value.

Now, though, with the US economy in a crawling recovery at best, Europe barely growing and Japan mired a deflationary spiral, the Bush administration can benefit from the dollar’s decline and has indicated no worry about it.

A weaker dollar is a boon for hard-hit US manufacturers whose goods are cheaper in foreign markets and it serves as a buffer against deflation by boosting prices for imports.

The worry comes from allies like German Chancellor Gerhard Schroeder who told Russia’s Interfax news agency on Friday a rising euro value against the dollar was punishing. It is already dampening economic developments as German products are becoming too expensive outside the euro zone, he said.

Japan’s Prime Minister Junichiro Koizumi was just as concerned, since its economy is so export-dependent.

We don’t want a further rise in the yen... basically, a stronger dollar is better, he told parliament on Thursday.—Reuters