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A strong US dollar worries Trump, but it’s no use blaming the Fed or China
- It is Donald Trump’s own policies that have helped to create the right conditions for continued greenback strength
- With intervention a risky idea, unless those policies change, there is little to be gained from the blame game
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Why you can trust SCMP
US President Donald Trump’s unease at the strength of the US dollar is no secret. There has been some talk that Washington might physically intervene on the currency markets to weaken the greenback. Yet, how could that succeed when it is Trump’s own policies, including towards China, that are fuelling the very US dollar strength that Trump dislikes?
Additionally, intervening on the foreign exchanges, to weaken the greenback, would not come with a guarantee of success or necessarily garner support from others.
From a practical perspective, it would seem unlikely that Japan would wish to see the Trump administration embark on intervention that could lead to further appreciation of the Japanese currency against the greenback, when policymakers in Tokyo are already griping about what they perceive to be unwarranted yen strength.
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And if the United States decided to go it alone, Washington might well come to regret setting a precedent that essentially nullifies the long-held consensus among G7 nations that the setting of exchange rates should be left to the currency markets.
In Japan’s case, that G7 consensus has arguably exerted a restraining influence in Tokyo where, historically, policymakers have not been averse to intervening to influence the yen’s value when they have deemed it appropriate.
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