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U.S. Dollar Strength: Is This What Trump Administration Wants?

May 02, 2018 10:03 AM ETUUP, UDN, USDU4 Comments
John M. Mason profile picture
John M. Mason


  • Over the past three months, the value of the US dollar has strengthened after falling through most of President Trump's time in office.
  • The President has stated many times that he wants a weak dollar in order to support US goods and reduce the trade deficit in the balance of payments.
  • The question is, what might Mr. Trump do if the value of the dollar continues to strengthen?

The value of the US dollar reached a two-and-one-half to three-month high yesterday. The Wall Street Journal Dollar Index closed at 86.13 yesterday, up from its near-term low of 82.70 reached on February 15, 2018.

At the close yesterday, it took only $1.991 to buy one Euro whereas on February 1, one Euro cost $1.2507, its near-term low.

As far as the Japanese yen is concerned, it took ¥109.86 to purchase one dollar at yesterday’s close, whereas it took ¥106.15 to buy a dollar on February 15.

It took $1.3612 to buy one British pound at the close of business yesterday, whereas it took $1.4262 to purchase one pound on February 1.

What has happened over this time period?

Well, for one, the growth rate of the European economies appeared to weaken from what many had come to expect for this year. The same for Japanese growth.

At the same time, it appeared as if the US economy might be picking up steam for the future.

At the same time, the Federal Reserve System appeared to be going through a regime change.

Jerome (Jay) Powell took over the reins as Chair of the Board of Governors of the Federal Reserve System from Janet Yellen. Although Mr. Powell has been a Governor for several years now, there has been a substantial amount of uncertainty about how his leadership might differ from that of Ms. Yellen.

For one, Ms. Yellen and her predecessor as Fed Chair, Ben Bernanke, have followed a monetary policy that stimulated the US stock market in order to produce a wealth effect that would increase and sustain consumer spending so as to spur on the macroeconomy.

In addition to this effort, Federal Reserve officials wanted to be sure to err on the side of monetary ease so as to

This article was written by

John M. Mason profile picture
John M. Mason writes on current monetary and financial events. He is the founder and CEO of New Finance, LLC. Dr. Mason has been President and CEO of two publicly traded financial institutions and the executive vice president and CFO of a third. He has also served as a special assistant to the secretary of the Department of Housing and Urban Development in Washington, D. C. and as a senior economist within the Federal Reserve System. He formerly was on the faculty of the Finance Department, Wharton School, the University of Pennsylvania and was a professor at Penn State University and taught in both the Management Division and the Engineering Division. Dr. Mason has served on the boards of venture capital funds and other private equity funds. He has worked with young entrepreneurs, especially within the urban environment, starting or running companies primarily connected with Information Technology.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (4)

Trump has actually gone on record as being both for and against, a strong dollar.
Michael Roat profile picture
Kudlow is advocating a strong U.S. dollar policy. ""Devaluations and weak currencies do not create U.S. jobs. Instead, weakened currencies are accompanied by relative price changes, leading to inflation in the devaluing country". A weak dollar and accompanying high inflation would sow the seeds for the next Volcker type recession. Prolong the expansion and keep a lid on inflation with a strong U.S. dollar even if there are negative effects in emerging markets.
Artificial market manipulation only suppress the negatives for a bit and delay the turn of the economic cycle. Debt is debt....have to be paid back.
Martin Schwoerer profile picture
It is difficult to make predictions that concern an irrational actor. There are so many possible logical results, but in addition there are some possible illogical things that could happen -- the unknown unknowns, as it were.

Trump could simply say, "the economy is fantastic now that I am President", and stop beating on the Dollar. Many of his fans are already making statements of that kind.

Then, he could stop worrying about the Dollar, assuming he knows a strong Dollar is deflationary. Since the tax cuts and the trade wars are inflationary, a strong Dollar could be a counterweight that might also stay off some the Fed's planned rate hikes.

Then, he might start bashing the Dollar again, but already the markets should know they have to take anything Trump says with a grain of salt. Actually, his words might be a good counter-indicator by now: when Trump bashes Amazon and the stock subsequently falls, buy Amazon, because he is mostly talk and very little action, to put it politely. Dollar, wash, rinse, dry, repeat.
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