On the eve of an international monetary meeting here today, Treasury Undersecretary Anthony Solomon said "the dollar has been doing extremely well," and predicted that international money markets would be much more stable this year and next.
Finance ministers and central bankers from all over the world will meet in a one-day session at the International Monetary Fund building. They constitute the IMF's Interim Committee of the Board of Governors, the lending institution's chief policy-making group. Denis Healey, chancellor of the exchequer of the United Kingdom, is the committee chairman.
A general topic of discussion will be ways of strengthening the IMF's "surveillance" role, not only of exchange rates, but of basic economic policies being followed by member countries. The U.S. will support an enlarged role for the IMF, Solomon said.
In that connection, the impact of the $13 billion Japanese current account (trade and services) deficit on the world economy is certain to come up in today's meeting. An IMF surveillance team recently returned from Tokyo after studying the economy there, and reportedly made a negative report on the prospect that Japan might achieve its 6.3 percent growth goal for fiscal 1979.
Routinely, there also will be meetings of the Group of 24, representing poor nations, and of the Group of 10, representing the industrial rich ones. The G-10 is expected to renew the General Agreement to Borrow (GAB), which from time to time supplements the resources of the IMF.
Solomon said the two main agenda item for the Committee are the world economic outlook and a discussion of a long-debate "substitution account."
The latter is a proposal for deposit of dollars by countries holding what they consider an excess into an IMF account, in exchange for special drawing rights, a special credit created by the IMF for distribution to members.
On world economic affairs, there is general concern that economic recovery prospects are clouded by uncertainty over oil supplies and prices, an outgrowth of the chaos in Iran.
Nonetheless, Solomon said he still expects a reduction in the U.S. current account deficit, which hit $17 billion last year, and a reduction in the Japanese current account surplus.
In discussions Monday in Tokyo, Japanese leaders told Solomon and other U.S. officials that the fiscal 1979 Japanese current account surplus would be cut to $7.5 billion.
Coindidentally, West Germany yesterday announced a switch in their balance of payments accounts from a surplus of 2.014 billion marks in December 1978, to a deficit of 2.231 billion marks last January.
Solomon said the dollar has been strengthening despite uncertainties over the oil situation and with practically no intervention. He said that while the U.S. had paid about $5 billion of the $30 billion in dollar-supporting resources marshalled last Jan. 1, enough money had flowed back into the fund so the $30 billion is virtually intact.
He attributed a stronger undertone to the dollar to "a more realistic analysis" in the foreigh exchange markets of the underlying factors in the American economy, and a growing perception that the impact of Iranian oil disruption is felt more keenly among European and Japanese oil consumers than in the U.S.