Taking the dollar down, or is it up?

By The Economist online

IF THERE was a consensus view at the start of the year, it was that the dollar would rise. Fund managers surveyed by Bank of America Merrill Lynch were overweight the currency (even though they worried that it was a crowded trade).

The stars seemed aligned in the greenback’s favour. The Federal Reserve was set to raise rates, while other major central banks were keeping monetary policy loose; that should boost the dollar’s attractiveness in terms of yield. The new Trump administration was set to unveil a fiscal stimulus and boost growth; that should encourage those who wanted to buy American equities or invest in American factories. And tax proposals were designed to persuade American companies to repatriate overseas profits, giving the dollar a further lift.

So why has the dollar retreated to hit a 12-week low? The main reason is the rhetoric of the new administration. Mr Trump told the Wall Street Journal that

Our companies can’t compete with them (Chinese companies) now because our…

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Read more here: Taking the dollar down, or is it up?

Category: Business and finance, Buttonwood’s notebook

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