Strong dollar puts Trump's economic agenda at risk before midterms

what happened

Reuters columnist Jamie McGeever writes that the dollar's climb to an 18-month high against major peers works against the economic agenda of Donald Trump. The administration wants a weaker dollar to revive manufacturing, boost exports and narrow the trade deficit, yet the deficit has widened and imports have hit record levels.

The dollar's strength is largely a matter of relative weakness: concerns over French and Japanese debt have pushed investors toward US assets, weighing on the euro and the yen. Targeted interventions, including the recent Treasury action to support the yen, are seen as too small to have lasting effect, while broader multilateral coordination runs against the 'America First' stance.

McGeever argues that the November 3 midterms will test whether voters give the administration the time to reverse the dollar's trend.

why it matters

For markets, the gap between the administration's weak-dollar goal and capital flows into US assets matters. A persistently strong dollar pressures exporters and firms with foreign-currency revenue, and possible intervention remains a risk for currency markets.

market impact

EUR/USD and USD/JPY: a stronger dollar pressures the euro and yen, with intervention risk

tags

instruments