U.S. shows more dollar bravado

By Glenn Somerville

WASHINGTON (Reuters) - Treasury Secretary Henry Paulson on Thursday dialed up the rhetoric on his claims the U.S. economy was recovering, hinting that U.S. and European officials believe the dollar is due for rebound.

On the heels of a Financial Times report saying there was now a "united" desire for a stronger dollar, Paulson modified his standard terminology that U.S. long-term fundamentals were strong -- calling them as good or better than anyone's.

"The long-term prospects of the U.S. economy are very strong, and compare favorably with those of other economies around the world." Paulson said, adding to a sense in markets that policy-makers see the time ripe to curb a dollar drop.

"I think what officials are saying is, 'enough is enough,'" said Alan Ruskin, chief international strategist at RBS Greenwich Capital in Greenwich, Connecticut. A cheaper dollar has helped boost U.S. exports but it also makes imports more costly at a time when inflation fears are on the rise.

The FT report contained a bland quote from an unnamed U.S. official that volatile foreign markets took as a signal that U.S. and European officials were once again saying that the dollar had fallen too much.

"The short-term was getting more attention than the longer term," the U.S. official said. Paulson repeated on Thursday, as he has done almost daily in strategic interviews, his belief that the economy has survived the threat of a housing-induced slump in activity.

The euro has gained about 16 percent in value against the dollar since the beginning of 2007.

WORST IS OVER?