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By Sudeep Reddy and Jon Hilsenrath

Thursday The dollar hit its lowest level since August 2008, but U.S. authorities have not intervene to stop the fall.

In recent days, the president of the Federal Reserve (Fed), Ben Bernanke and Treasury Secretary Timothy Geithner, have publicly expressed their desire for a strong dollar. However, there is almost no evidence of a change in Fed policy or the Treasury, or the underlying economic conditions, which could alter the downward trend of the dollar.

The currency has fallen almost 9% so far this year against a basket of currencies of major U.S. trading partners While Bernanke reiterated in his first news conference on Wednesday he wanted a strong dollar, the Fed has left clear that it will keep interest rates very low for now. The central bank's decision not to alter the rates announced at the very time when other central banks begin a tightening cycle, led many investors to sell dollar-denominated assets.

U.S. authorities may be more concerned if the dollar's decline showed signs of disruption to other financial markets as a fall in stock markets or a rise in the prices of Treasury bonds, which would raise rates. Although there is a risk of this happening so far has not materialized.

"I see no great reason to be concerned at this time from the standpoint of the United States, "said Edwin Truman, a researcher at the Peterson Institute for International Economics. Referring to the fears of some traders who fear a collapse of the dollar was that" the market may have begun to believe in something that has no much sense. "

Still, some analysts are bracing for a more precipitous fall." loose monetary policy in the United States has been positive for post-crisis recovery and bought us a long time, "said Kit Jucker, strategist main foreign exchange at Societe Generale in London. "But if this gets out of control, then it is very dangerous and are very close to that point, "he said.

The dollar extended its decline on Thursday after the Commerce Department reported that economic growth reached just 1.8% in the first quarter and that new applications for unemployment benefits were increased last week. The euro stood at $ 1.48, a slight increase over the previous day, while the dollar fell to 81.57 yen. The demand for U.S. government debt increased, making the yield fell to 3.316% ten years. Pouches ignored the weak economic data and the Dow Jones Industrial Average rose 72 points, or 0.6%, to reach 12,763.31 points.

Several factors conspire against a good performance of the U.S. currency. One is that the U.S. is growing much more slowly than other economies and capital tends to go where returns are higher. Since the recovery began in mid-2009, United States has grown at an average annual rate of 2.8%, well below the developing economies and a slow pace even with respect to previous U.S. recoveries.

easy credit policy of the Fed, by which the central bank has injected U.S. dollars into the financial system to maintain low interest rates has caused many investors to move their money to economies that offer better returns.

Investors also are worried about high U.S. fiscal deficit. Although Democrats and Republicans agree on the need to address the problem, their proposed solutions are very different.

Even if the U.S. authorities want to prop up the dollar, have limited tools and their chances of success are slim right now. One way to raise money is to raise interest rates to attract greater investment flows. However, a rate hike could slow the economy and Bernanke made it clear he does not follow that path.

Direct intervention in currency markets would please many countries as Europeans and Latin Americans, concerned about the rise of their currencies. However, the conditions that warrant an intervention, as a free fall of the dollar and drastic fluctuations in other markets have not yet said Truman.

Source: WSJ