NEW YORK (Reuters) - The Obama administration will have to persuade the world that the U.S. strong dollar policy is for real this time as it prepares to borrow $2 trillion to revive the U.S. economy from its worst crisis in decades.

Less than 48 hours after Barack Obama became president, his choice for U.S. Treasury secretary, Timothy Geithner, said a strong dollar is in the United States’ interest.

That phrasing -- first used by former Treasury Secretary Robert Rubin more than 14 years ago -- lost its weight and credibility when it was over-used by the Bush administration.

The greenback lost about 40 percent of its value versus the euro and more than 15 percent versus the yen between 2000 and 2008. A weaker currency was an important step for the Bush White House in rebalancing a global economy plagued by a U.S. trade deficit and huge Chinese surplus.

“This time around the administration probably means it when it says it backs a strong dollar. They have to be dead serious about it,” said Samarjit Shankar, a director for global strategy at the Bank of New York Mellon, in Boston.

“Trillions worth of U.S. debt is coming soon to the markets. Which foreign central bank or institution will buy this debt if they are not fully convinced the dollar will remain strong?” he added.

The challenge for Obama’s team, analysts said, will be to support the dollar’s value without direct manipulation in the markets, with the economy in recession, interest rates near zero, and a ballooning current account deficit.

Moreover, Washington will have to achieve all that without antagonizing China, the biggest holder of U.S. Treasury debt, the analysts said.

“It will be a real test. One thing is to finance a $450 billion deficit and another is to finance $2 trillion,” said Chris Rupkey, a senior financial economist at Bank of Tokyo-Mitsubishi in New York.

“We are always worried foreigners could ditch the dollar. But they have no incentive to do that,” he added. “The amount they own is so large that they can’t get out of it without impacting their own currencies and economies in the process. And that includes China.”

Geithner, in written response to questions from the Senate Finance Committee on Thursday, said a strong dollar “is in America’s national interest.” For details, see [ID:nN22364222]

But while stressing the need for a stronger dollar Geithner also said the administration would be vigilant against currency manipulation, in particular that stemming from China.

President Obama “believes that China is manipulating its currency” and that he has pledged to use “all the diplomatic avenues open to him to see change in China’s currency practices,” he said in his response.

DOLLAR BULL-CYCLE

“In the case of China, the U.S. may actually favor a weaker dollar,” said Daniel Katzive, a director for global foreign exchange at Credit Suisse Securities in New York. “But despite all the talk, practical policy implications are likely to be minimal.”

The U.S. trade gap with China totaled $246.5 billion year-to-date through November and the country holds $681.9 billion of U.S. Treasury securities.

Katzive said the dollar will stay strong in coming months as the financial crisis deepens in other regions, notably in Britain and the euro zone.

“As long as the euro is weak, the dollar will remain strong,” he said. “Those are the only two reserve currencies in the world and no matter the fundamentals of the U.S. economy, dollar weakness will not be a problem for now.”

Risk aversion and the spread of the credit crisis boosted demand for the greenback and it gained about 20 percent versus the euro since the single currency touched a record above $1.60 last year. The euro was last trading at $1.2960 , rounding up a 7.1 percent drop since the start of the year.

“The dollar’s relative strength is here to stay and may last years, not months or weeks,” said Brian Belski, a U.S. strategist at Merrill Lynch in New York. “It’s not going to be a gangbuster move, but the U.S. will be the first to recover.”

According to Merrill, strong-dollar cycles tend to last an average of 10 years.

“We are going to have much more verbal back-up for the dollar during Obama,” said Shankar at Bank of New York. “And if they keep repeating the mantra, they will be heard.”