FROM THE OFFICE OF PUBLIC AFFAIRS

The Treasury Department today released 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 November 1, 1998, through June 30, 1999, when the U.S. economy continued to perform strongly, despite economic weakness in both emerging market economies and some of the industrialized countries. 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 continuing economic contractions or declining growth rates across emerging markets, Japanese economic weakness, and a slowdown in European growth, U.S. export growth stagnated and the U.S. current account deficit increased significantly, and it 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 implied 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 appreciated by roughly 1.8% on a trade weighted basis between November 1998 and June 1999. This appreciation followed a 4% depreciation between August 1998 and November 1998.

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 our major trading partners is manipulating its

exchange rate under the terms of the Act.