‘I can do that in two seconds,” US President Donald Trump said when asked why he ruled out action to weaken the US dollar. AFP Photo
WASHINGTON: 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.
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. – AFP