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Trump hails strong US dollar, but doesn’t rule out intervention
WASHINGTON, July 27, 2019 (BSS/AFP) – President Donald Trump sent more
confusing messages to financial markets and trading partners on Friday,
hailing the strong US dollar but refusing to rule out using intervention to
get a more favorable exchange rate.
That appeared to contradict comments from a top economic advisor just
hours earlier who said the White House had ruled out an move to weaken the
dollar.
“The dollar is very strong. The country is very strong. The dollar is a
beautiful thing in one way but it makes it harder to compete,” Trump told
reporters.
But when asked why he had ruled out taking action when it was discussed at
a meeting with his economic team on Tuesday, Trump said, “I can do that in
two seconds. I didn’t say I’m not going to do something.”
Trump has repeatedly accused countries like China and Germany of taking
advantage of weaker currencies to boost exports to the United States but
according to a report in Politico on Friday, he smacked down a push by White
House trade hardliner Peter Navarro to weaken the dollar to compensate.
Larry Kudlow, head of the White House National Economic Council, had told
CNBC earlier Friday that despite persistent concerns about actions by other
countries to influence their currencies, “we have, as a matter of policy,
ruled out currency intervention.”
The fact the White House was even discussing intervention was a bombshell
to some economists.
“The administration was seriously considering currency intervention. …
That in itself is extremely concerning,” Gregory Daco of Oxford Economics
said on Twitter.
“I see this as a key risk over the next 12 months,” he told AFP.
Adam Posen, a former central banker who leads the Peterson Institute for
International Economics, said Kudlow felt obliged to go on record about White
House policy amid increased recent speculation that Trump was considering
launching an effort to move exchange rates.
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He cautions that “if we start attacking the currency policy of Japan and
China for doing quantitative easing or loose monetary policy, that’s just
going to backfire on us.”
The United States is growing faster than many of its major trading
partners and as those economies slow their currencies will tend to lose
value, making their exports more competitive.
The euro is relatively weaker than the dollar because the European economy
is slowing but trying to counteract that is “probably going to cause more
economic damage,” Posen told AFP.
– ‘Down the tubes’ –
Amid signs the US economy has stumbled, in part due to Trump’s aggressive
trade war, the Federal Reserve is poised to cut the benchmark interest rate
next week, reversing what now appears to have been a mistaken increase in
December.
Trump has blamed the Fed for raising interest rates, which increases
demand for the dollar and hence its value, but he hailed the strong US
currency, saying despite that “we’re doing really well” while “other
countries have a currency down the tubes.”
Kudlow said Trump is concerned about foreign countries that may be
manipulating their own currencies lower to “try to gain some short-term
temporary trade advantage. That we do not like.”
“In some cases we think there is manipulation” by other governments.”
However, the US Treasury’s twice-yearly report on currency practices has
failed to find any cases of outright manipulation.
Treasury has nevertheless toughened its standards and the Commerce
Department currently is considering a change in rules that would allow it to
impose retaliatory tariffs on countries that have gained a trade advantage
after manipulating exchange rates.
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