January 24, 2018
Caught in a relentless downward spiral which has puzzled many a trader, it wasn’t as if the US Dollar needed any help in accelerating its decline, yet that’s precisely what happened this morning in Davos when none other than the US Treasury Secretary Steven Mnuchin “broke with tradition” of supporting the US currency, and said that he endorsed the dollar’s decline as a benefit to the U.S. economy.
“Obviously a weaker dollar is good for us as it relates to trade and opportunities,” Mnuchin told reporters on Wednesday at the World Economic Boondoggle in Davos. “But again I think longer term the strength of the dollar is a reflection of the strength of the U.S. economy and the fact that it is and will continue to be the primary currency in terms of the reserve currency.”
Well, if China’s ambitions are unchallenged, the dollar’s reserve currency status may not be primary for long, but we’re not there quote yet.
Meanwhile, the dollar tumbled on the news, with the Bloomberg dollar index sliding to its lowest level in three years, extending the recent slide amid investor concern over President Donald Trump’s protectionist agenda and a special counsel investigation stemming from his 2016 campaign.
Mnuchin shocked Davos participants because while it echoed Trump’s own doubts over a strong currency, the Treasury Secretary’s “mini QE” came as U.S. officials confront the global elite with their “America First” agenda.
As Bloomberg adds, just hours after the U.S. slapped tariffs on solar panels and washing machines, commerce Secretary Wilbur Ross, who spoke alongside Mnuchin, said more measures are in the offing. And there is no more efficient way to accelerate trade wars than to slam your own currency, making foreign exporters suffer. The only question is how will they, and everyone else, will respond.
And speaking of trade wars, Wilbur Ross said that “Trade wars are fought every single day… So a trade war has been in place for quite a little while, the difference is the U.S. troops are now coming to the rampart.”
It’s a message Trump is likely to send in person on Friday when he becomes the first American president in 18 years to address the Davos gathering of corporate executives and investors.
This article was posted: Wednesday, January 24, 2018 at 8:37 am