FROM THE OFFICE OF PUBLIC AFFAIRS

The Treasury Department today released the update to the eleventh annual Report to Congress on International Economic and Exchange Rate Policy, which reviews developments in the major economies and exchange markets, and assesses the foreign exchange systems of a number of our major trading partners. The report is provided under the Omnibus Trade and Competitiveness Act of 1988.

This report covers the period from July 1, 1999 to December 31, 1999, when the U.S. economy continued to perform strongly relative to its major trading partners. The U.S. economy over this period continued to experience a combination of strong output growth, low inflation and employment expansion not seen in nearly three decades.

Amid a slow recovery in emerging markets, continued Japanese economic weakness, and the beginning of faster European growth, U.S. exports grew slowly and the U.S. current account deficit increased significantly and is likely to continue to increase in the months ahead. The relative strength of the U.S. economy fueled strong capital inflows into the United States which helped sustain domestic investment despite low personal savings, but also contributed to a continued deterioration in the U.S. net international investment position.

Reflecting the relative strength of the U.S. economy compared to key U.S. trading partners, the nominal value of the dollar depreciated by 1.6% on a trade weighted basis in the second half of 1999. This depreciation followed a 2.6% rise in the first half of 1999.

United States monetary authorities did not engage in any intervention for their own account during the period covered by this report.

The Report presents an updated assessment of whether countries have manipulated exchange rates between their currencies and the dollar to prevent balance of payments adjustment or gain an unfair competitive advantage in international trade (as defined in the Omnibus Trade and Competitiveness Act). It concludes that none of the major trading partners of the United States is manipulating its exchange rate under the terms of the Act.