Making Sense Of The Mnuchin-Trump Currency War Confusion

The Dollar is tumbling once again today, erasing President Trump's rescue bid yesterday, and pushing FX volatility up to its highest in 4 months.


Here's why...

Trying to make sense of the Mnuchin-Trump confusion, DB’s FX Strategist Alan Ruskin believes that what you have here is two officials who like a weak(er) USD in the short-term that will help the US trade accounts and support growth, albeit to the point where strong growth will eventually support a strong USD longer-term.

In Alan’s view this is a way of saying that in the short-term a weak USD is good for US trade, and in the long-term a strong USD is good because it is indicative of strong growth a healthy economy.

Alan highlights that this is clearly a very confusing message to convey and it’s unlikely to either be reported or understood correctly, which doesn’t really help the message.

Notably, as we saw yesterday (with stocks slammed as Trump jawboned the dollar higher), BofA is also warning that a reversal of the dollar's recent weakness could also spark a sharp correction in stocks.


As a reminder, a U.S.-Europe FX spat was a trigger of the 1987 stock market crash... and the dollar's YTD weakness is the worst since 1987.

Interestingly, stocks soared (just as they are now) as the dollar crashed (just as it is now) in 1987... before things went pear-shaped...

In other words - "Higher dollar = pain trade = risk-off coming."


YUNOSELL The_Juggernaut Fri, 01/26/2018 - 11:20 Permalink

Well obviously, they want the US dollar to lower, but shouldn't really be admitting this openly, since they have the world reserve currency that other countries depend on to hold it's value and not erode away with excessive dollar printing


Especially when tax receipts are falling YoY, the first thing to be sacrificed in the value of the dollar

In reply to by The_Juggernaut

nope-1004 Bes Fri, 01/26/2018 - 11:31 Permalink

I believe the dollar is being jaw boned down so that the markets can be setup to correct and not send the US$$ too high.

If you look at all segments of the financial fraud, there are usually 2 or 3 financial effects for every 1 event.  In other words, if the dollar stayed high, it would be too uncomfortable to correct the stock market as the dollar would soar through all resistance.

It's all a game.  No market is 'free'.


In reply to by Bes

Countrybunkererd Consuelo Fri, 01/26/2018 - 12:00 Permalink

I have DOS leXXis now and I would clearly say Lexus.  My 2005 is still running strong.  I hope to get another decade or more if I am still here.  I will put it this way:  Other than routine maintenance (and a check up from hitting a couch that jumped out of a bed of a pick-up in front of me) It just doesn't ever need to go in to the shop.  Neither does Mrs. bunkererd's.

I know that will change at some point but the track record is absolutely unbelievable.

In reply to by Consuelo

Pandelis lester1 Fri, 01/26/2018 - 11:23 Permalink

back in April 2017 Trump said:

“I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting, that will hurt ultimately…It’s very, very hard to compete when you have a strong dollar and other countries are devaluing their currency.”


In reply to by lester1

LawsofPhysics Fri, 01/26/2018 - 11:21 Permalink

1) Place bet

2) make statement that will benefit your position

3) Profit from expected "market" move

Any questions?

Just remember that "when fraud is the status quo, possession is the only law."

asteroids Fri, 01/26/2018 - 11:26 Permalink

The FX market is YUGE in comparison to stawks. Flapping your gums can cause terrible damage. That's why everyone tells you to keep your mouth shut when talking about your currency. What arrogance.

J Mahoney Fri, 01/26/2018 - 11:27 Permalink

They wanted it to go down but maybe not this much--but hell, why not, the big banks know all the moves--they will make money on the way down and on the way back up to where they want it

Ink Pusher Fri, 01/26/2018 - 11:32 Permalink

How in hell do we make sense of the re-collateralization of already collateralized debt?

There is no "sense" to be found, realized or acted upon.

The only three words anyone needs to know today are the actual driving definitives;

Corruption,Collusion and Manipulation.

Obscene FRN Call Mr. Class and … Fri, 01/26/2018 - 14:42 Permalink

We have no way of knowing, since a free market was killed in 1913. It's not an American Dollar's exchange rate that is being negotiated, it's the FRN ...a debt rather than asset. Davos is a negotiation of the trivializing of our nation's debt vs others but all currencies are misrepresented by referring to promissory notes as the real money they've replaced. The other half of debt is an agreement with its creditor, so it seems logical to desire to devalue our currency in order to inflate away debt, not well-received by those who want to be repaid. Not well received by anyone who has been raised in a centuries-proven paradigm of thrift. Not well received by people who work. The irrational exuberance fomented during the Roaring Twenties transferred a lot of leveraged assets into bank hands. It's a strategy. A well-worn one once observing the cycles beyond one's own aware years on the planet. Currency wars precede kinetic wars with an eerie

In reply to by Mr. Class and …