Mnuchin defends weaker dollar comments

January 30 13:37 2018

He said it was seen by markets as a departure from traditional US currency policy, at the World Economic Forum in Davos, where other world leaders have made swipes at what they see as USA protectionism.

Beyond style, there are good economic reasons the last seven Treasury secretaries stayed with the strong dollar mantra.

The US dollar’s decline has come amid expectations that other central banks, notably the European Central Bank and the Bank of Japan, are moving closer to cutting monetary stimulus.

“I thought my comment on the dollar was actually quite clear yesterday”, Mnuchin told reporters.

The U.S. currency staged a late-day comeback Thursday after President Donald Trump said it would get ” stronger”, appearing to contradict comments made only the day before by Treasury Secretary Steven Mnuchin.

The central bank is expected to raise rates at least two more times this year after its first hike to the benchmark interest rate just last week.

March U.S. Dollar Index futures settled at 88.891, down 0.336 or -0.38%.

European Central Bank President Mario Draghi emphasized the worldwide commitment to avoid competitive devaluations and said Mnuchin’s support for a weaker dollar could lead to unwanted tightening of monetary policy.

Spot gold was a shade higher at $1,350.80 per ounce after sliding 0.8 percent overnight. data, an important indicator of the strength of the broader economy.

Finance Minister Taro Aso said Friday the existing worldwide pledge to refrain from targeting foreign exchange rates for competitive purposes should be kept, after contradictory remarks on the dollar by U.S. President Donald Trump and his treasury secretary shook currency markets.

In a nod to the sensitivity of currency markets to any such statements from officials, Trump added: “I don’t like talking about it because frankly nobody should be talking about it”. “Further weakness in the dollar and rising risks of a correction in equity markets, in particular, should be supportive”.

Asked about the comments on the dollar by Trump and Mnuchin, Japanese Finance Minister Taro Aso said on Friday that major economies have agreed to avoid targeting currencies for the objective of trade competitiveness.

-The U.K.’s FTSE 100 index fell 0.4 percent.

The Stoxx Europe 600 Index rose 0.5 percent.

-The MSCI Emerging Markets Currency index rose 0.6 percent.

“Mnuchin’s comments have kicked-started a debate about the end of the strong dollar policy that has allegedly been in place since the Clinton years”, noted strategists at TD Securities.

Shares of drugmaker AbbVie Inc (ABBV.N) also climbed 10 percent after the company significantly boosted its 2018 earnings forecast and said it hopes to accelerate dividend growth and share buybacks.

The yield on the 2-year note hit 2.104 percent, its highest level since September 2008.

The dollar has shed 10% of its value since a year ago.

Singapore dollar surged to its highest in three years against the US dollar

Mnuchin defends weaker dollar comments
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