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Team Trump talks taxes, trade and the dollar in Davos

25 Janvier 2018

A weaker dollar can help exports from the USA, but it take a toll on consumers and on smaller, more domestic companies by driving up costs of imported components.

On Wednesday, the dollar was down further against most currencies, hitting a three-year low against the euro.

Breaking with traditional USA policy of support for a strong currency, Treasury Secretary Steven Mnuchin endorsed the dollar's decline as a benefit to the US economy.

Still, Mnuchin said that the US was open to new trade agreements. "The president has always believed in that".

"It's not necessarily a surprise that they want a weaker dollar", Murphy said.

While some analysts argue that Mnuchin's comments do not break with the U.S. But whatever the reason, the administration's acceptance of a weak dollar provides additional encouragement for bears.

“Obviously a weaker dollar is good for us as it relates to trade and opportunities, ” Mnuchin told reporters in Davos, according to Bloomberg, adding that the currencys short-term value is “not a concern of ours at all.”.

While Kruger sees short-term risks of a Dollar rebound, analysts at Bank of America Merrill Lynch reckon the longer-term prospects of the Dollar are brighter than markets are now assuming. While the French CAC 40 Index dropped by 0.7 percent, the U.K.'s FTSE 100 Index and the German DAX Index both slumped by 1.1 percent.

In this Summit, president and founder of the Internet giant, Alibaba, Jack Ma, said trade should not be used as a weapon, because when it stops, conflict starts.

Tough US talk on trade, on the eve of Trump's arrival at the Swiss ski resort on Thursday, contrasted sharply with a chorus of government leaders, from India and Brazil to Germany and Canada, who urged cooperation and criticized protectionism. "Given the market's willingness to blindly sell the dollar, such comments only help".

Todd Mattina, a chief economist at Mackenzie Investments, said Mnuchin's comments about the greenback were surprising because he was basically breaking with the long-standing "strong dollar policy" in the U.S.

In 1997, Rubin noted the dollar had been robust "for some time now", prompting a sell-off. The previous low was 70.69 at the height of the US financial crisis in March 2008.

"It's not something we're particularly concerned with". That's the potential implication of a comment today from Mnuchin.

"The reform momentum of the Trump administration has received another blow", said strategists at Morgan Stanley previous year when the dollar fell to a 10-month low in July.

Whether the United States administration's attempts at fostering further Dollar weakness will be effective is an entirely different matter and the decline might be a knee-jerk reaction.

Team Trump talks taxes, trade and the dollar in Davos