INSUBCONTINENT EXCLUSIVE:
economies and one that President Donald Trump took up just this week to browbeat China and Europe in his increasingly pitched trade war.
But
as outlandish as it sounds, some Wall Street observers say the possibility that Trump himself will launch a sustained campaign to weaken the
Charles Dallara, a former US Treasury official and one of the architects of the Plaza Accord, the 1985 watershed agreement between the US
and four other countries to jointly depreciate the dollar
They prefer to refer to it as foreign-exchange intervention
assets.
Since falling toward a three-year low in April, the dollar has appreciated almost 6 per cent, according to the Bloomberg Dollar Spot
Its advance last quarter was the strongest since 2016, as the greenback appreciated against all 16 major currencies
The dollar is also 11 per cent above its average over the 13-year span of the dollar index.
A strong-dollar policy has been a cornerstone
for successive US administrations
Since taking office in 2017, he has routinely talked about wanting a weaker dollar to support US manufacturing
an adverse effect on foreign demand for US assets
While overall demand at auction has been up and down this year, foreign holdings of Treasuries have slumped to an almost 15-year low of 41
China, the largest overseas creditor, has pulled back this year
Japan, the second biggest, has reduced its share to the lowest level since at least 2000.
Not ThrilledIn recent months, Trump has stepped up
the rhetoric as the dollar has bounced off its lows
In an interview published by Reuters this week, Trump once again accused China and the European Union of manipulating their currencies
under Chairman Jerome Powell, which have boosted the dollar.
So what tools does Trump have at his disposal if he wanted to go beyond mere
talk The most direct would be for him to order the US Treasury (via the New York Fed) to sell dollars and buy currencies like the yen and
euro using its Exchange Stabilization Fund, according to Viraj Patel, an FX strategist at ING
But because the fund only holds $22 billion of dollar assets, the impact would likely be minimal
Any direct intervention that is larger and more ambitious in scope would also require congressional approval, he said.
However, Patel says
Such a move would be a long shot by any stretch of the imagination, but with Trump invoking national security to impose tariffs, Patel says
to include currency clauses in any new trade deals, like it did with the updated US-South Korea trade agreement in March.
There are plenty
of caveats, of course, and the odds of any kind of US intervention are still low
And while White House trade adviser Peter Navarro has broached the subject of a global accord on currencies in the past, the chances of a
multilateral agreement on the dollar are remote
Protectionism was on the rise, as were fears of foreign imports costing American jobs
Then, the bogeyman was Japan
US to open a new front in the FX markets
The yuan has tumbled 9 per cent since April, when trade friction with China started to intensify
stopped Trump from criticizing the country for taking advantage of the US by keeping its exchange rate artificially low
frustrations in emerging markets over what some officials saw as a means to manufacture a weaker dollar
