Dollar languishes as US Treasury boss seems relaxed on fall
The dollar languished near three-year lows against the euro on Thursday after United States Treasury Secretary Steven Mnuchin doubled down on his view that a weaker US currency is good for the country's economy, at least in the short term.
At a press briefing at the World Economic Forum, Mnuchin did not seek to clarify the previous day's comment that the fall in the value of the dollar was "good" for US exporters.
The view largely breaks with a long-standing policy in which US officials back a strong dollar, and it raised the possibility that the Trump administration may be trying to talk down the currency to give the US economy an edge in trade as part of an 'America First' strategy.
"I thought it was actually balanced and consistent with what I've said before, which is we are not concerned with where the dollar is in the short term as it is a very, very liquid market," Mnuchin said. "We believe in free currencies and that there's both advantages and disadvantages where the dollar is in the short term."
Mnuchin's comment on Wednesday prompted one of the biggest daily falls in the dollar in years. The euro hit a three-year high against the dollar and briefly rallied again on Thursday, hitting US$1.2461. It later eased back slightly to trade flat at US$1.2400.
Many in the markets think that Mnuchin has effectively ditched any idea of a "strong dollar" policy, which has been the mantra - publicly at least - of most treasury secretaries for about 20 years. A lower currency makes US products more competitive in international markets, though it does have the potential to stoke inflation by pushing up import costs.
Simon Derrick, chief currency strategist at BNY Mellon, said no US treasury secretary in the past 15 years or so "has been quite so blunt in highlighting the advantages of a weaker currency."
Mnuchin said the US is not seeking to use the currency as a weapon in any trade war, but that the US government will do all it can to bolster US business.
"We want free and fair and reciprocal trade," he said. "We are not looking to get into trade wars. On the other hand, we are looking to defend America's interests."
In the longer term, Mnuchin said, the US currency's value will reflect the underlying strength of the US economy.
"What's good for the United States is good for the rest of the world in terms of growth," Mnuchin said. "The agenda is gonna be [that] the US is open for business, that the new tax law, the tax cuts, makes investing in the United States very attractive, the ability to move manufacturing jobs to the United States and the opportunities in the United States."