The Post criticized the administration for its decision to let the dollar fall {editorial, Nov. 6}. This criticism flies in the face of the belief of most economists that additional depreciation of the dollar is required if the U.S. trade deficit is to be eliminated or even reduced to a tolerable level. This point became clear at the annual meetings of the International Monetary Fund and the World Bank last month, when the fund projected that, at then-existing exchange rates, the trade imbalances among the major industrial countries would persist.

The Post is correct to state that if continued depreciation of the dollar is expected, investors will tend to delay placing their funds in dollar securities. What this implies, however, is not The Post's conclusion that the dollar should remain stable but that the depreciation should be accomplished in a hurry.

It has been clear for more than six months that the markets have expected the dollar to fall farther. That is why private investors abroad were holding back even before the recent administration decision and why most of the country's trade deficit this year has been financed by purchases of U.S. securities by central banks abroad. The main explanation for the sharp rise in U.S. interest rates from the spring until last month was the expectation that the dollar would go down. Market expectations are not always right, and policy should not always be guided by them -- but this time they were right.

The editorial argued that the dollar is ''at roughly its true parity with other major currencies in actual purchasing power.'' This recourse to a theory about exchange rates that has been rejected by most economists is unconvincing. Moreover, there is no such thing as a ''true parity.'' At best, one can say that a currency has returned to some historical relationship to other currencies. But other relationships have changed.

As compared with 1980, for example, American exports to Latin America and other debt-ridden developing countries have been depressed. U.S. exports of agricultural products have fallen, and there is little prospect they will revive. And the string of external deficits in our balance of payments has increased our external debt enormously. This requires much larger interest payments to the rest of the world. For all these reasons, the dollar has to fall in real terms below where it was in 1980 if the external deficit is to be eliminated.

These considerations do not conflict at all with The Post's oft-stated contention that the budget deficit needs to be brought down. But cutting that deficit is a necessary, not a sufficient, condition for curing the second of the ''twin deficits'' -- that in our balance of payments -- without other undesired effects. The sooner we get a substantially lower dollar, the better.