"Dollar strong": the tension goes up a notch between Trump and the Fed


The passage of the euro below the threshold of 1.10 dollar Friday in session irritated the US president. On Twitter, he's pestered against the greenback "The strongest of history", accusing "the Fed (which) does nothing! ». The economic outlook has certainly darkened in the United States, but also in the rest of the world, which supports the dollar. And the renewed geopolitical tensions also play in this sense because it encourages US investors to sell their foreign assets.

In an interview with Bloomberg, US Treasury Secretary Steven Mnuchin said a few days ago that "
the situation could change in the future

    but "for the moment, we do not envisage intervention on the foreign exchange market". The mere fact that the Secretary of the Treasury does not exclude this assumption, unlike his predecessors, suggests that the tension has risen a notch.

Since 2018, it trades daily between 110 and 180 billion dollars on the spot transactions on the two main pairs of currencies (Eurodollar and dollar-yen) on the New York Square. The Fed can intervene on the foreign exchange market on its own but only to "counter disorderly conditions in the market", such as high volatility of the greenback. Acting outside this mandate would expose it to criticism. "I do not think it would remain inactive if the Treasury decided to sell dollars. It could, for example, jointly announce a fall in interest rates to strengthen the impact on the market and without itself intervening on foreign exchange "says Steven Englander, head of currency research at Standard Chartered Bank.

Strong weak Fed dollar

The Trump administration wants the greenback to fall
accompanies the economic slowdown

    and facilitates the eventual exit from a recession. It wants the help of the Fed, but it seems ready to take in hand the destiny of the dollar if the situation requires it. "We have a very strong dollar and a very weak Fed. I will work brilliantly on these two points and the United States will enjoy! " said a week ago, Donald Trump. The US central bank has been mentioned 110 times on Twitter by the president this year and most often very critically. The "strong dollar" was evoked by him
seven times during the month of August


"The recovery of the US economy after the dot-com bubble and the 2008 crisis would have been stronger and stronger if it had benefited from higher exports, and therefore a weak dollar. However, after the great financial crisis, many countries, including China, intervened to weaken their currency against the dollar. In the United States, exports have not been able to contribute much to the recovery of activity ", says Brad Setser, economist at the Council on Foreign Relations.

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