Donald Trump wants a weaker US dollar. But that’s just bad economics

Trump has accused Europe and China of devaluing their currencies to gain trade advantages and claims the Fed is keeping interest rates too high. But, whether he likes it or not, a strong greenback is also a sign of a resilient US economy

Reading Time:3 minutes

Donald Trump has tried to talk down the US dollar, and accused Europe and China of devaluing their currencies to gain an unfair competitive advantage. Photo: Reuters

Published: 11:00pm, 4 Jul 2019Updated: 3:54am, 5 Jul 2019

Is the tide finally turning against King Dollar? The Bloomberg Dollar Spot Index – a gauge of the greenback’s performance against a basket of other major currencies – has dropped 1.4 per cent since the end of May.

Currency traders, moreover, are turning bearish on the dollar, increasing their underweight positions since the start of last month, according to data from Bloomberg.

The slide in the dollar will embolden US President Donald Trump to step up his intervention to weaken the currency, discarding the government’s long-held doctrine that a strong dollar is in the country’s best interests.

For months, Trump has tried to talk down the greenback. He has accused Europe and China of devaluing their currencies to gain an unfair competitive advantage.

The reality is that the more Trump steps up his assault on the global economic order that the US engineered, the more likely investors are to take defensive positions, directing more capital to safe havens such as the dollar.

Last month, Trump claimed that Mario Draghi, the outgoing president of the European Central Bank, was manipulating the euro after Draghi said the ECB was ready to relaunch its quantitative easing programme if the threat of deflation in the euro zone became more severe.

Select Voice

Choose your listening speed

Get through articles 2x faster

1.25x

250 WPM

Slow

Average

Fast

00:0000:00

1.25x