WASHINGTON, April 19: The dollar’s slide against the euro and sterling has left US authorities silent, with analysts saying the weak greenback may be a benefit for Washington and its preoccupation with Asia.

The dollar has been hovering near all-time lows against the euro and the British pound has risen above two dollars for the first time in 26 years, but this has generated no comments from Washington.

US officials “are not saying anything right now because they’re not especially worried about the weakening of the US exchange rate given that it has yet to put unwanted upward pressure on Treasury bond yields,” said John Lonski, chief economist at Moody's Investors Service.

Lonski said that low rates for US bonds mean there is strong demand for government debt and Washington is not forced to pay higher rates for borrowing.

“Given the deceleration of domestic spending, the US Treasury quietly approves of recent dollar exchange rate weakness,” he said.

The Treasury has not changed its public mantra that a strong dollar is in the nation’s interest.

Market movements accelerated after last weekend’s meeting of Group of Seven finance ministers, which repeated a phrase that exchange rates “should reflect economic fundamentals” and that excessive fluctuation is “undesirable.”

The G7 had faced some pressure from Europe to deal with the weak yen, which is being used for so-called carry trades using low-cost loans in Japan.

But Washington and Tokyo had resisted any specific language on the yen, and the result has been further weakness in the Japanese currency. The dollar has been impacted by the shift into European currencies and amid concerns about softening US economic conditions.

David Kotok, analyst at Cumberland Advisors, said Washington appears more focused on the Chinese yuan in the face of a massive US trade deficit with China, and to some degree on the yen.

Kotok said the US administration “seems to make its noise in the direction of the Far East,” but is silent about the yen “because the administration knows the Japanese are weaning themselves from a zero-interest rate policy.”

In the United States and Britain, key rates stand at 5.25 per cent. The main interest rate is at 3.75 per cent in the eurozone and 0.50 per cent in Japan.

Analysts expect the Bank of England to increase British interest rates by a quarter-point to 5.50 per cent in May and further still before the end of 2007.

Eurozone rates are also believed headed higher but traders expect US rates to go lower this year.

“The growth rate in Europe is higher or projected to be higher than in the US, and the growth rate in China is substantially higher,” Kotok said.

“The strength of the currencies around the world are not determined by rhetoric, they are determined by economic variables, particularly the real interest rate,” or the base rate minus the inflation rate.

Eric Chaney, analyst at Morgan Stanley, said the investment bank's calculations show the euro is 20 per cent over-valued against the US dollar, 34 per cent against the yen and 16 per cent against the Swiss franc, with only sterling slightly overvalued against the single European currency.

“In the real world of financial markets, fundamentals matter only in the long term and deviations from fundamentals may last for long periods of time,” Chaney said. Some European officials fear the high euro may kill off the economic recovery by pricing the zone’s exports out of the market.

But Chaney said eurozone officials “have already implicitly acknowledged that a weaker US dollar makes sense, in order to reduce the US current account deficit that they have identified as a threat for financial stability.”—AFP