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Macroscope | If Trump has a currency war in mind as part of his presidential campaign, he’s not likely to get very far
- Trump’s comments on the US dollar and the Federal Reserve have sparked fears that he might take steps to weaken the American currency. However, neither the Fed nor other central banks, such as in the euro zone and Japan, are likely to cooperate
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Donald Trump is in full campaign mode.
While America’s president, an anti-establishment populist and former reality television host, has, in truth, never stopped campaigning since he began his run for the White House in 2015, his rhetoric is becoming more incendiary by the day as he gears up for the most divisive presidential election in recent memory.
Although Trump reserves his most provocative tweets for domestic politics, he has been much more vocal of late about his displeasure over the strength of the US dollar, which he attributes to both the Federal Reserve’s tight monetary policies and the currency practices of the US’ main trading partners.
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In the space of several weeks, Trump has reignited fears of a “currency war”, a threat that was a major concern for investors in the aftermath of the 2008 financial crisis when the Fed launched its quantitative easing programme, but receded in the last several years as US interest rates began to rise.
In the past month, Trump has accused Europe and China of manipulating their currencies to gain an unfair advantage over America, and has gone so far as to say that he would prefer Mario Draghi – the president of the European Central Bank who has hinted that it might be necessary to relaunch quantitative easing if the slowdown in the euro zone persists – to replace Jerome Powell as head of the Fed.
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