Dollar skids to 3-year low as Mnuchin welcomes currency weakness

  • Dollar skids to 3-year low as Mnuchin welcomes currency weakness

Dollar skids to 3-year low as Mnuchin welcomes currency weakness

Mnuchin and Ross are at the World Economic Forum in Davos, Switzerland.

The strong dollar policy was seen as a way to assure investors that Washington would not intervene in exchange markets to debase the currency. Later, Ross attempted to change the narrative in an interview on CNBC, when he took issue with the interpretation that the U.S.is in a policy shift, but the dollar continued to weaken.

Currency markets latched onto the comments as confirmation that the Trump administration would actively seek out and encourage a lower Dollar.

As the dollar dropped, currencies like the British pound, Japanese yen and the euro rose.

It's not the first time Mnuchin has said a weak Dollar would be good for trade, he said the same thing earlier in August 2017, in an interview with CNBC - at that time he added the proviso that in the long-term a stronger Dollar would reflect continued confidence in the United States economy and the currency's status as a reserve currency, a view he reiterated in Davos.

'We don't have to worry about this crowd ...

The dollar weakened further after Treasury Secretary Steven Mnuchin said the declining dollar is good because it helps US exporters.

"This is about an America First agenda, but America First does mean working with the rest of the world", Mnuchin said.

The leaders of France and Germany, President Emmanuel Macron and German Chancellor Angela Merkel, are set to headline the roll-call of leaders Wednesday, two days before President Donald Trump is due to give his own speech in the heavily snow-covered Swiss town of Davos.

Trump's Commerce Secretary Wilbur Ross spoke alongside Mnuchin and discounted any suggestion that the White House was attempting to launch an global trade war. Ross's suggestion that the USA could enact more levies touched off concerns of a trade war that could hamper the synchronized global growth that's sent equities around the world to all-time highs.

On Wednesday Ross said the U.S.is fighting back against countries that have taken advantage of trade deals in the past.

The Commerce Secretary also said USA trade authorities are investigating whether there is a case for taking action against China for infringing intellectual property, calling Beijing's 2025 technology strategy a threat.

"The Mnuchin comments have helped feed it (the weaker dollar) a little bit, but they certainly didn't get the move going in the first place", said BMO Capital Markets currency strategist Stephen Gallo, in London.

With Trump expected to address the summit tomorrow, world leaders here have raised concerns about a return to greater economic protectionism. Gold climbed 1.2 percent.

The U.S.'s latest move on tariffs raises the stakes for the world economy that's enjoying its best performance since the financial crisis.

'We are really here to talk about what we have done'.

Gary Cohn, the head of Trump's National Economic Council, put it this way: "America First is not America alone".

He will also attend a reception in his honour and host a dinner for European business executives.