Why the US Treasury Secretary Might Want to Talk the Dollar Down

The Story: 

On Wednesday, January 24, Treasury Secretary Steve Mnuchin said, “Obviously a weaker dollar is good for us as it relates to trade and opportunities.” The remark helped create the fact — last Wednesday saw the dollar drop to its lowest value in three years as against other currencies.

Background:

Did Mnuchin want his words to have that effect? He might have. A government that wants to assist its export industries can often do so by devaluing its currency, relative to the currencies of the countries where the goods exported will be sold. Of course, a policy of deliberately weakening one’s own currency in the international markets also generates push-back from the nations receiving those now cheaper imports.

The Thing to Know:

By Friday Mnuchin was clearly combatting the implications of Wednesday’s statement, as if the U.S. had just taken itself to the precipice of a disastrous currency race-to-the-bottom with trading partners, and had decided to draw back.

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