The image of the mighty US greenback being pummelled in currency markets may not be a comforting one, but there is nothing to suggest the Bush administration is unhappy about its slide in value so far.

In fact, while analysts regard the administration economic team's handling of the dollar's drop as inelegant at best, the White House stands to benefit from the fall by pleasing business constituents while possibly boosting the economy.

The currency's decline is not to be taken lightly, though. There are risks it could accelerate suddenly and dangerously, in part because big US trade deficits are financed by inflows of foreign capital as well as because of free-floating geopolitical worries about the Middle East, terrorism and other matters that make US investments seem less safe than in the past.

Accounting scandals like the WorldCom debacle that broke last week are eroding faith in the world's most liquid markets, creating another possible trip-wire for the currency.

"There is a much higher probability now of a sudden downdraft catching the dollar's value than was the case just one or two years ago," said economist Allen Sinai of Decision Economics Inc. in Boston.

As the dollar slid to eight-month lows against the yen and to multi-year lows against the euro, not far from parity with the European currency, investors and analysts were wondering when it will hit bottom.

To date in 2002, the euro has risen more than 10 per cent against the greenback. The US dollar has fallen about nine per cent versus the yen, despite recent persistent efforts by the Bank of Japan to slow the yen's climb.

And amid the US currency's crumpling, many were asking whatever happened to the much-vaunted "strong dollar" policy born in the Clinton era and left to flounder under Bush.

The strong dollar policy used to consist of the simple and unadorned repetition of a phrase resembling: "The United States favours a strong dollar."

White House economic adviser Lawrence Lindsey said on on CNBC television the administration did indeed support a strong dollar - but he also backed the view that markets should set the dollar's value.

That added to muddlement stemming from separate sets of remarks earlier in the week from President George W. Bush and Treasury Secretary Paul O'Neill, who both said much the same thing: that the dollar would find its own value in markets.

Bush's comments were taken as a signal in markets to sell the dollar, which dropped to near two and-a-half year lows, leading first the Treasury and then the White House to say that in fact there was no policy shift.

"The American position is unchanged. The strong-dollar policy is the policy of the United States," White House spokesman Ari Fleischer said to tidy up after the President's relatively rare foray into foreign-exchange commentary that normally is the domain of O'Neill.

Whatever the intent, and regardless of the clumsy handling that contrasted with the Clinton administration's disciplined treatment of currency policy, analysts said the effect was likely welcomed by the Bush team.

"The truth is that they're not unhappy with a dollar dip as long as it is not precipitous," said economist Sung Won Sohn of Wells Fargo Bank in Minneapolis. "There really is no such thing as a strong or a weak dollar by itself: the market always correctly sets its value."

There are pluses from a cheaper-valued dollar. "It's giving US businesses, that had been complaining bitterly about the high-valued dollar, a better shot at more foreign sales and it's adding pricing power that goes to their bottom line in terms of more profits," Sohn noted.

"So if a dollar depreciation was going to occur, as was long predicted, it's coming at the perfect time from an economic viewpoint," he added.

A cheaper dollar makes American-produced goods less costly in foreign markets, a potential help to member companies of the National Association of Manufacturers who have led a prolonged battle against a pricey dollar.

Even better from US producers' viewpoint, it makes imports like Japanese cars more costly for Americans and makes it more likely they will opt for domestic models instead.

Lara Rhame, vice-president of foreign-exchange research at Brown Brothers Harriman in New York, noted the dollar's depreciation so far has been relatively gradual and modest but suggested the Bush economic team has not been very smooth.

"I think it's certainly been a less united front than we've seen in past administrations, in large part because the past administrations in which (former Treasury secretaries) Robert Rubin and Larry Summers led the commentary stick to a very clear script," she said.

O'Neill, a self-described maverick, appears to alter the script often and the waters are further muddied by the fact that he is not the only economic team member to comment on the dollar - unlike during the Clinton years.

"O'Neill has departed from that script, placing himself outside by saying markets determine the dollar's value in a way that seems to give a nod of approval to what is happening and only when he is pushed does it seem he will say a strong dollar is in the US interest," she added.

"Simpler is better and repetition is better on currency statements but those are two things that this administration has moved away from or never learned," Rhame said.

Sinai similarly suggested that the Bush administration may be compelled to fine-tune its policy given that there are several negative factors at play for the dollar's longer-term value that could make it hard to keep a decline orderly.

"If any one of them takes a turn for the worse - the big current account deficit, the general direction of the US economy, any geopolitical concerns - it could significantly accelerate the movement downward in the dollar," he said.

In the current circumstance, Sinai said, the less said by O'Neill and other Bush economic team members, the better for the dollar - a tight-lipped policy like Rubin practiced.

"Almost anything that any of them say now will be subject to being misinterpreted or confusing or just clumsy and that is typical of periods like this," Sinai said.

He noted it was only after former President Clinton triggered volatility by commenting on the dollar that Rubin stepped in to take charge of foreign-exchange commentary and kept markets steady during the 1990s.

Sinai said the Bush administration has not clearly articulated what it means by a strong dollar and that may have to change if the decline in value is extended. "There is a market perception that the administration does not have a dollar policy and if its value gets pushed around enough, at some point they may have to enunciate just what their policy is," he said.