There may have been a “Trump bump” in the stockmarket but the opposite has been true in currency markets. The dollar has steadily weakened and the administration does not seem too concerned about it. Steven Mnuchin, the Treasury secretary, said this week that “Obviously a weaker dollar is good for us as it relates to trade and opportunities.”
He qualified his remarks by saying a strong dollar reflects a strong US economy. Leaving aside his clear confusion (so does the dollar’s weakness mean the US economy is weak?), it is rare for any Treasury secretary to welcome a fall in the greenback.
Paul O’Neill, who held the position under George W. Bush, declared that
I believe in a strong dollar, and if I decide to to shift that stance I will hire out the Yankee Stadium and some rousing brass bands, and announce that change in policy to the whole world.
There are many reasons why politicians like to speak about a strong dollar. A decline in the currency tends to push up import prices, and thus inflation. The US has a big fiscal deficit, which it has to finance from abroad; foreigners won’t be keen on buying fixed-income securities in a declining currency. Ten-year Treasury bonds now yield 2.64%, up 15 basis points in the last month; the five-year yield is up half a percentage point in the last year.