Dollar falls further as Mnuchin defends weak buck comments

26 January, 2018, 02:48 | Author: Eleanor Thompson
  • WTI Crude Oil

In an interview in Davos on January 24, 2018, Treasury Secretary Steve Mnuchin reiterated the Trump administration view that a "weaker dollar is good for trade". "It will also raise fears about the risk of global currency wars again - although we should be careful not to read too much into an errant comment made at Davos".

Mnuchin's statement may have had all the more ring of policy because of the Trump administration's assertive "America First" goal of reducing the approximately $500 billion annual US trade deficit.

"It's quite significant given that this is the first time in a very long time that a Treasury secretary has spoken against a strong dollar", said Sireen Harajli, FX strategist at Mizuho.

The treasury secretary reiterated that the dollar's strength over the long term was reflective of the strength of the U.S. economy.

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The loonie jumped almost three-quarters of a cent Wednesday, punching above the 81-cent mark, following comments by the U.S. Treasury Secretary that a weaker greenback is good because it helps American exporters.

The Treasury Secretary said that Trump's visit to Davos was to interact with other global leaders and to ensure that they understand his agenda.

The proximate cause of the overnight move was the "a weaker dollar is good for us" commentary from US Treasury Secretary Steven Mnuchin, with gold in USD now having moved beyond important resistance levels near USD $1345oz.

Whether or not the White House choreographed the dollar's slide to its lowest level in three years, the United States administration is certainly providing ammunition for those betting that the greenback will continue to weaken.

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The U.K.'s pound also saw a jump in value, trading at $1.4097 on Wednesday, up from $1.4 on Tuesday.

Meanwhile, the USA dollar traded at 0.8043 euro, down 0.0063 euro; gold was up US$13.72 to US$1,363.43 per ounce as at 1.03pm. But it fits with the Trump administration's stance on trade policy aimed at supporting exporters and reducing the nation's gaping trade deficits. Lagarde reiterated the IMF's view, presented in its World Economic Outlook this week, that the U.S. tax reform is likely to lead to dollar's strengthening in the medium term. "Perhaps Mnuchin will walk back his comments, but the message seems clear - this is what President Trump thinks and wants". "So we're very happy with where the currency is at the moment", he said.

"We are not looking to get into trade wars, on the other hand we are looking to defend America's interests", he said.

"None of this is what the USA economy needs now", Dalio wrote. More US companies and banks have said that they will look to invest more and create more jobs, following the tax cuts.

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