FROM THE OFFICE OF PUBLIC AFFAIRS

The Treasury Department today released an interim report to Congress on International Economic and Exchange Rate Policy, which reviews developments in the major industrial economies and exchange markets and assesses the foreign exchange policies of a number of our major trading partners.

This interim report, which is provided under the Omnibus Trade and Competitiveness Act of 1988, covers developments between October 1, 1995, and March 30, 1996.

The report reviews the factors that have contributed to the appreciation of the dollar during this period, including increased confidence in U.S. economic policies and the underlying strength of the U.S. economy, reduced current account imbalances in the United States and Japan and the changing stance of macroeconomic policy in Japan and Germany.

The report also examines whether countries have manipulated the exchange rate between their currency and the U.S. dollar in order to prevent effective balance of payments adjustment or to gain an unfair advantage in international trade. The report reviews a number of criteria for making such an assessment and applies those criteria to our major emerging market trading partners. The report concludes that these countries are not manipulating their exchange rate for the purpose of preventing effective balance of payments adjustment or gaining unfair competitive advantage in trade.

The U.S. Treasury continues to monitor exchange rate policies and capital account regimes of the major U.S. emerging market trading partners, and will continue to encourage countries to avoid recourse to capital controls or exchange rate manipulation to prevent balance of payments adjustment or to gain an unfair competitive advantage.