The Daily Prophet: Trump's Currency Tantrum Dooms the Dollar

If there was any doubt that the White House is actively seeking to weaken the dollar, then a tweet from President Donald Trump Monday should put the issue to rest. Trump wrote on Twitter that “Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!” The Bloomberg Dollar Spot Index promptly fell the most in three weeks.

By singling out the currencies of China and Russia, Trump is effectively putting the foreign-exchange market on notice that a race to the bottom is on. In Trump’s view, one of the keys to winning a trade war is through a weak currency, which helps make exports more attractive. Last April he grumbled about the dollar, telling the Wall Street Journal, “I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me.” Then in January, U.S. Treasury Secretary Steven Mnuchin said that a weaker dollar is good for U.S. trade. “These weak dollar expectations will remain entrenched in currency markets, especially if the administration continues its mercantilist policy focus,” Viraj Patel, a London-based currency strategist at ING Groep, told Bloomberg News. The Bloomberg Dollar Spot Index is down 6.79 percent since Trump’s election victory and 10.8 percent since his inauguration, a move that some strategists cited as reason for the rally in stocks last year. But Trump is playing a dangerous game with the dollar.