Treasury Secretary James A. Baker III said yesterday that the Reagan administration is "somewhat encouraged by the moderate decline in the dollar" in recent months, which he hopes will dampen protectionist pressures growing in Congress.
"We're not displeased with the decline of the dollar, particularly with the way in which it has declined, that is, moderately," Baker said in an interview.
A senior administration official, speaking on a background basis, predicted that a further drop of the dollar in foreign exchange markets is possible. This official said that although the decline -- about 13 percent from peaks set in mid-March -- would not be immediately reflected in a reduction in the nation's trade deficit, it is one of the best ways to cure the problem.
The dollar bounced up and down after a weak start yesterday. Some dealers reported concern over testimony by Federal Home Loan Bank Board Chairman Edwin Gray that 10 percent of federally insured savings and loan institutions are insolvent.
Baker vigorously defended the administration against the charge that it doesn't have a policy to deal with the growing U.S. trade deficit, which hit $123 billion last year and is expected to rise to between $140 billion and $150 billion this year. But he acknowledged that pressure is building on Capitol Hill for what he said is a protectionist solution.