U.S. Treasury Secretary Timothy Geithner said he was reassured during a Gulf visit that the dollar will remain the region's main reserve currency and said he wanted to find ways to reduce oil-price volatility.

Interviewed on Al Aribiya television on Wednesday near the end of a two-day swing through Saudi Arabia and the United Arab Emirates, Geithner also renewed a pledge to back a strong dollar in an apparent bid to calm Mideast investor worries.

It is the policy of the United States and it will remain the policy of the United States to remain committed to a strong dollar, he said, adding he had heard no concern about the dollar's status in talks with Gulf business and government leaders.

Geithner's meetings in the United Arab Emirates included sessions with leaders of the world's largest sovereign wealth fund, Abu Dhabi Investment Authority, which has taken losses during the past two years of financial crisis on its U.S. investments.

On balance, Geithner claimed that Gulf officials were supportive of the Obama administration's efforts to restore U.S. growth and still had faith in the dollar's value.

My view, and this is the view I heard expressed here, is the dollar ... will remain the principal reserve currency, he said.

Five of the six Arab states that comprise the Gulf Cooperation Council -- Saudi Arabia, the UAE, Bahrain, Qatar and Oman -- peg their currencies to the dollar. The sixth, Kuwait, uses a basket heavily weighted in dollars.

In response to questions, Geithner said he was not concerned about the level of Saudi holdings of U.S. Treasury securities and noted that when risks are high investors generally want the safest securities they can find.

Oil prices were on the agenda in both producing countries but Geithner refused to comment on specific price levels. He did say, though, that it was in the Gulf's interest and everyone else's to try to nurture tentative signs of recovery in the global economy.

Many analysts say abrupt swings in oil prices are making it harder for the global economy to claw its way out of recession and to resume growing. In the United States, consumer prices climbed 0.7 percent in June on a jump in energy prices.

It's also very important to us ... that we explore ways to bring better transparency to energy and commodity markets and find ways to reduce volatility in these markets, Geithner said.

He said Gulf officials showed quite substantial confidence in the broad strategy that is being pursued to try to get the U.S. economy back on track and said he told Gulf officials that huge budget deficits will be ratcheted down as soon as possible.

The U.S. budget deficit in the first nine months of fiscal 2009 has topped $1 trillion.

A senior U.S. Treasury official said Geithner held talks with officials who head the Abu Dhabi Investment Authority (ADIA), the world's largest sovereign wealth fund, but said no pitch was made for the fund to step up its investments in the United States.

ADIA's holdings include a $7.5 billion stake in Citigroup (C.N) made in November 2007 when the U.S. bank was struggling in the midst of the meltdown in subprime mortgage markets.

ADIA, like other wealth funds, has suffered losses during the two-year-long financial crisis and indicated earlier this year that it was reviewing its long-term strategy. Just how much it may have lost isn't known since ADIA, like other funds, does not publicly detail its finances.

It is a potential concern for the Obama administration if sovereign wealth funds turn wary about continued U.S. investment and Geithner was at pains when in Saudi Arabia to make the case that the United States wants foreign investors.

We are committed to preserving the openness of our economy, Geithner said on Tuesday in Jeddah, Saudi Arabia.

A Treasury official said Geithner made the same point on Wednesday to leaders of ADIA and to another fund, the Abu Dhabi Investment Council, that mainly invests inside the UAE.

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