04/15/2017

Trump’s Weak-Dollar Temptation

The Wall Street Journal

Donald Trump doesn’t have many firm policy convictions, but one of them seems to be a mercantile faith in the virtue of a weak currency. The U.S. dollar “is getting too strong,” Mr. Trump told our Journal colleagues on Wednesday. “That’s hurting—that will hurt ultimately.” Someone should tell him that weak-currency politicians tend to be losers.

One irony of his comments is that for weeks Mr. Trump had been celebrating the boost in economic confidence since his election, which has included a rise in the dollar. When investors have confidence in a country, they tend to put money into assets denominated in that country’s currency. The “Trump reflation” in the dollar and stocks, which has since ebbed as the prospects for pro-growth reform seem more uncertain, was a good economic sign.

Mr. Trump’s dollar-bashing is also highly unusual because even Presidents who favor dollar devaluation typically say the opposite. Or they say nothing at all, leaving the dollar commentary to the Treasury Secretary, whose mantra usually is “a strong dollar.” And that makes sense. Why talk down the purchasing power of Americans?

A dollar-bashing President can also disrupt financial markets, as Mr. Trump’s comments initially did on Wednesday. The greenback recovered, but currency markets are volatile and sharp movements can do serious harm at delicate financial times or take firms under if they’ve made the wrong currency bet.

Above all, dollar bashing can complicate the Federal Reserve’s monetary policy. The Fed is currently in a tightening phase, which tends to support a stronger dollar, so Mr. Trump’s comments are counter-cyclical.

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