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Alan Greenspan, the chairman of the Federal Reserve, said on Friday that America's record trade deficit might be poised to stabilize and even fall because of market pressures and belt-tightening by the Bush administration.
Mr. Greenspan was speaking at a gathering coinciding with a scheduled meeting of the finance ministers and central bank governors from the Group of 7, the leading industrialized nations. His remarks inspired a strengthening of the dollar, which had fallen because of a weak jobs report in the United States.
Although Mr. Greenspan acknowledged that America's expanding trade deficits and foreign indebtedness had reached record levels, he sounded more sanguine than he was several months ago.
In November, Mr. Greenspan predicted to international bankers that foreign investors would show a "diminished appetite" for financing American debt, leading to a sell-off of the dollar.
In contrast, on Friday, Mr. Greenspan shifted emphasis to the relentless expansion of global investment flows.
"Deregulation and technological innovation have driven the globalization process by tearing down the barriers that have separated economic agents," Mr. Greenspan said, reprising a favorite theme. "The effect of these developments has been to markedly increase the willingness and ability of financial market participants to reach beyond national borders."
