Treasury Secretary Steven Mnuchin isn’t backing down from his comments yesterday when he said that a weak dollar is good for trade, adding this morning that he is not concerned where the currency is trading in the short term.
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“It’s not necessarily a surprise that they want a weaker dollar”, Murphy said.
While Trump and his team may want to cheer the dollar’s drop, even in private, egging it on might be a mistake.
Here’s the crux: If you make solar panels in MI and want to sell them to Denmark, a weak dollar is good for you because it means euros buy more solar panels and business is greased. “The dollar is of all currencies a floating currency and one where value is determined by markets and geared by the fundamentals of United States policy”. Earlier, the euro rose to its highest in three years after the European Central Bank showed little concern about the single currency’s hottest run in almost four years.
Elsewhere, the yen rose to the strongest since September versus the dollar after Bank of Japan Governor Haruhiko Kuroda commented on inflation.
OIL: Benchmark U.S. crude lost 9 cents to $65.42 per barrel in electronic trading on the New York Mercantile Exchange. Meanwhile, Commerce Secretary Wilbur Ross stoked trade tensions by hinting at tariffs, injecting volatility into the global risk-on rally that has padded records across asset classes.
DATA WATCH: The U.S. domestic product for the fourth-quarter of 2017 is due to be released Friday and is expected to show continued strong expansion of the world’s largest economy. Nor do they have a lever that can push the dollar higher.
Against the yen, the dollar held steady at 109.42 yen, staying above a four-month low of 108.50 yen struck on Thursday.
“While factors other than monetary policy expectations have been driving the dollar for some time, we think that will change as expectations for the Fed to raise rates begin to increase”.
The same is true of a lower dollar.
‘The market forces, fundamentals all suggest that the dollar should weaken over the course of 2018, ‘ said Roy Teo, investment strategist for LGT Bank in Singapore. The euro has already climbed to its strongest against the dollar since 2014. Investors are also casting a watchful on the World Economic Forum, where Trump will deliver a keynote as his administration ramps up protectionist rhetoric.
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Mnuchin also said there were both “benefits and issues” to a weaker dollar, and that the dollar’s value is “not a concern of mine”. Most economists, tax cuts aside, expect that to continue, which should continue to curb the dollar. However, in his haste to correct (read “undermine”) his Treasury Secretary, the President has inadvertently done much more: Talking the dollar up or down has now become the key takeaway from Davos. Low interest rates and lower taxes are the flawless hyper fuel for the market and more fodder for Trump’s twitter megaphone.
