Lew Plays Down Brexit Risk as Yellen Heads Back to Washington

  • U.S. Treasury secretary sees no sense another crisis unfolding
  • Lew says strong dollar reflects performance of U.S. economy

U.S. Treasury Secretary Jacob J. Lew sought to assure investors that financial market spasms caused by Britain’s vote to leave the European Union would not trigger another global crisis as Federal Reserve Chair Janet Yellen skipped a conference in Europe to return to Washington.

“There’s no sense of a financial crisis developing,” Lew told CNBC television in an interview Monday. “There’s no question this is an additional headwind but I think it is something we can manage through and Europe and the U.K. can manage through.”

Britain’s June 23 vote to quit the EU tore through world markets, pummeling the pound and high-yielding assets as more than $2.5 trillion was wiped from global-equity values on Friday. Stocks continued to retreat Monday, with the S&P 500 index sinking more than 2 percent to its lowest level since March.

“There is a kind of orderliness in the markets," Lew said before equities trading opened in New York. “There was a surprise and reaction, but the systems are all working.”

The dollar has soared as investors scramble for shelter from the uncertainty caused by the shock outcome, which prompted British Prime Minister David Cameron to announce he would step down by October.

The yen reached 99.02 per dollar, the strongest level since 2013. Finance Minister Taro Aso told reporters Monday that Prime Minister Shinzo Abe has asked for various measures to stabilize Japanese markets.

Strong Dollar

Asked about currencies in the CNBC interview, Lew reiterated that the strong dollar reflects the strength of the world’s biggest economy and is in the national interest. He said the Treasury is monitoring global currency markets closely, adding that “unilateral” currency interventions could be destabilizing.

“We’ve made it clear we will work as the G-7 and G-20 to communicate clearly unilateral action to intervene would be destabilizing,” he said. There “has to be a reason based on disorderly markets and the need for there to be action.”

Lew’s comments came as the Fed said that Yellen had pulled out of a European Central Bank conference she had been scheduled to attend in Sintra, Portugal, and would fly back to Washington. It did not offer an explanation for her reason to withdraw.

Yellen, who was in Europe over the weekend attending the annual general meeting of the Bank for International Settlements in Basel, Switzerland, was originally slotted to appear on Wednesday on a panel alongside ECB President Mario Draghi and Bank of England Governor Mark Carney. Carney withdrew on Sunday.

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