U.S. officials indicate they are not worried by the big drop in the dollar since Iraq's invasion of Kuwait but are concerned about the strength of the world economic expansion.
"The adjustment that has taken place (in the dollar) has been orderly," U.S. Treasury Undersecretary David Mulford said.The weaker dollar should help U.S. exports by making American goods more competitive overseas, he said.
Mulford also predicted a continued fall in the U.S. trade deficit despite higher oil prices, which will swell America's bill for imports. The United States imports about half the oil it consumes.
The dollar has dropped about 7 percent against the Japanese yen and 2.5 percent against the German mark in the past month as investors have bet the United States will cut interest rates to try to avoid a recession.
Lower interest rates tend to stimulate the economy but also make a currency less desirable for investors to hold.
Mulford said he does not expect a recession soon but acknowledged that the jump in oil prices over the past six weeks will further slow already sluggish U.S. economic growth.
"We are very concerned there should be a continuation of growth in the global economy," he said. "Continued global growth must be a high priority."
The dollar and global economic growth are expected to be high on the agenda when finance ministers and central bankers from the seven wealthiest industrialized nations gather here starting Sept. 22 to take stock of the world economy.