Yellen says currency intervention acceptable only in rare situations

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WASHINGTON, April 25 (Reuters) - U.S. Treasury Secretary Janet Yellen said on Thursday the strong dollar reflected the strength of the U.S. economy and high interest rates, insisting that interventions by governments in currency markets were acceptable only in rare circumstances.

Yellen, speaking in an interview with Reuters, acknowledged the strength of the dollar and divergences with other countries, but said the dollar's rise reflected "the strength of the U.S. economy and the level of interest rates."

The former chair of the Federal Reserve declined to comment on a possible intervention by Japan to support the yen, which set a 34-year low against the dollar on Thursday, or to state her views on the current level of the yen.

"Our expectation of all major countries - and this is a G7 commitment - is that exchange rates will be market-determined," Yellen said, adding that the goal was to ensure that market interventions to deal with disorderly markets or excessive volatility would occur only rarely and be consulted in advance.

Yellen's remarks came in an interview with Reuters and followed a trilateral statement last week with the finance ministers of Japan and South Korea centered on the weakness of the two key trading partners' currencies.

The three ministers, in a rare warning, said they agreed to "consult closely" on foreign exchange markets, acknowledging concerns from Tokyo and Seoul over their currencies' recent sharp declines.

Receding expectations of a near-term U.S. interest rate cut have pushed the yen to its weakest in more than three decades, keeping markets on alert on the chance of an intervention by Japan to prop up the currency.

Some analysts said Washington's acknowledgement of the currency concerns from Tokyo and Seoul may lay the groundwork for intervention. (Reporting by Alessandra Galloni, Andrea Shalal and David Lawder; Writing by Dan Burns; Editing by Andrea Ricci)