U.S TREASURY'S MULFORD REAFFIRMS G-6 AGREEMENT

  Treasury Assistant Secretary David
  Mulford reaffirmed U.S. backing for the Paris Agreement among
  six industrial nations to cooperate closely to foster exchange
  rate stability around current levels.
      In testimony prepared for delivery before a Senate banking
  subcommittee, Mulford said there was broad recognition in Paris
  that "further substantial exchange rate shifts could damage
  growth and adjustment prospects."
      But he also said while there are clear understandings among
  the countries regarding cooperation, "We have refrained from
  establishing a system of target zones or ranges."
      Mulford also said the six nations have not spelled out the
  way in which they intend to deal with possible market
  developments.
      He said governments must retain flexibility in dealing with
  exchange market pressures and efforts to establish rigid
  exchange rate objectives "or to specify too precisely the goals
  of intervention" would hurt official attempts to react to
  market pressures, he said.
      Accordingly, Mulford said setting specific currency
  objectives and intervention to achieve those objectives would
  be counterproductive.
      Commenting on the trade deficit, Mulford reiterated the
  Treasury position that the current account deficit will decline
  from 148 billion dlrs last year to around 130 billion dlrs this
  year, due to the exchange rate adjustments of the past 18
  months.
      But he added trade imbalances would also be corrected by
  commitments from West Germany and Japan to stimulate their
  economies and by U.S. efforts to cut the budget deficit and
  enhance U.S. competitiveness.
      He also said some newly industrialized countries should let
  their currencies appreciate.
  

