Treasury Secretary James A. Baker III said yesterday that there are no signs that the sharp drop in the dollar over the past year has reduced foreign investors' confidence in the United States.
At a breakfast meeting with reporters, Baker refused to be drawn into a discussion of whether the dollar had fallen enough, as some American trading partners contend. "But we would always be worried if we felt that the decline was precipitous or if there were some risk of a free fall," he said. "We have not seen that since the Plaza meeting. We don't see that in the cards now."
The dollar has fallen about 30 percent against key currencies since officials of the nations known as the Group of Five -- the United States, Japan, West Germany, France and Britain -- met last September at the Plaza Hotel in New York and agreed on joint action to push the dollar down.
Baker said the flow of investment money from abroad has been uninterrupted despite the dollar's decline, because "most everybody wants to put his money in a secure, stable environment, and that's represented by investments in United States securities.
"I am not worried at all -- we have experienced no difficulty in selling [government] securities, and we haven't seen any indications that there is going to be a lessening of interest as a consequence of what we think is a very orderly, moderate decline of the dollar," he said.
From time to time, members of the Federal Reserve Board, including its chairman, Paul A. Volcker, have expressed concern that the dollar's dip might create an inflationary thrust, as well as discourage the flow of investment money here, especially from Japan.
Baker added that "we ought to continue to be vigilant" to protect the nation's good record on inflation, which he credited to the joint efforts of the Reagan administration and the Fed.
He said that he sees no differences between his view on this issue and Volcker's. "Normally, when you have a currency decline, there is a risk, generally speaking, that that can result in some inflation, and I don't disagree with that," Baker said. "What I'm saying is that I don't see that now, in part due to the fortuitous circumstance that oil prices were declining significantly at the very same time."
In any event, Baker called attention to the fact that "the dollar has been reasonably stable for the past two or three weeks."
On a related issue, Baker warned that no one should expect quick, "significant action" on the Tokyo summit decision earlier this month calling for greater economic coordination among the major powers, leading to what has been called a "managed float" among major exchange rates.
He said there have been some informal discussions among the seven summit governments, but no specific steps were likely until about the time of the annual meeting of the International Monetary Fund in Washington in September. Asked if the discussions had included "target zones" -- a system by which nations agree to keep their exchange rates within fixed relationships -- Baker said:
"No, there has been no discussion of target zones, but that doesn't exclude them, either."