Dollar Sinks To 2-Week Lows After Trump, IMF Warnings

In the week since President Trump decried the strength of the dollar and lambasted China, Europe for manipulating their currencies, the dollar has tumbled to 2-week lows and China's currency has seen a sudden dramatic shift.

Having said on July 20th that "China, the European Union and others have been manipulating their currencies and interest rates lower, while the U.S. is raising rates while the dollars gets stronger and stronger with each passing day - taking away our big competitive edge. As usual, not a level playing field..." the dollar has slumped...

At the same time, The IMF released a lengthy 150-page report, that appeared to support Trump’s claim that Europe has been able to 'win' on trade in part because of an undervalued currency.

As Bloomberg reports,  the chart below shows Germany’s real-effective exchange rate is weaker than implied by economic fundamentals, with a corresponding outsized current-account surplus. On the flipside, the greenback is stronger than it should be, which contributes to a swelling of the U.S. current-account deficit, suggest staff calculations at the policy lender.

In other words, there may be some truth to the claim trade-weighted currency levels adjusted for inflation are distorted in Germany as well as the U.S.

While the Euro (DEU) is the most under-valued, we note that in the last few days, the Chinese Yuan has seen its collapse stall...

And in fact is now trading the most above its official fix since early May, a very different regime than the last few weeks...

So is Trump winning again? We will see more today  after Trump's meeting with Juncker, where the 'strong dollar, weak Euro' is bound to come up.

“The euro is undervalued and the dollar, correspondingly, is one of the most overvalued currencies,” Kit Juckes, strategist at Societe Generale, wrote in a note.

“I wonder if that will come up in the trade conversations today?”


LawsofPhysics Wed, 07/25/2018 - 09:54 Permalink

Almost 8 billion people (and growing) are competing for the remaining resources that are required in order to maintain a decent standard of living. Do NOT believe those eCONomists when they try to tell you that there is "no demand"...

Economics is a social science that has been usurped for nefarious political reasons.


Money_for_Nothing Wed, 07/25/2018 - 10:10 Permalink

Trump's enemies think they have to collapse (stock market, economy, foreign relations, ...) to lower his approval and get rid of him. Trump is doing things that create FUD (Fear, Uncertainty, and Doubt). So a surprise would be if a economic crisis doesn't happen soon. Before the November election. This week or August, September, October. Halloween? Boo?

JailBanksters Wed, 07/25/2018 - 10:14 Permalink

You sure somebody didn't mix this chart up with the Global Climate Chart.

Both charts say the same thing, it has been Lower and Higher in Past, and we should all panic because it's not the same and it's Manmade.


MK ULTRA Alpha Captain Nemo d… Wed, 07/25/2018 - 12:12 Permalink

The Japanese are tightening, this means an end to the "carry trade". Before Japan printed, to make their currency cheap compared to the dollar. This is a huge change for the Japanese, it had always been the policy to weaken the Yen against the dollar. Now Japan is soaking up liquidity to make a super Yen?

It's interesting I was at the Savings and Loan this morning, the manager is a friend and we talked about currency. He was a bitcoin pioneer miner.

When I told him, the reason crypto took off is because of all the Chinese trying to get their money out. It was like a light going off in his head.

Then we went over the Yuan, my position is a crashing Yuan means a Tsunami of dollars flowing out of China to the tune of $2 trillion. This is what the Chinese People's Bank of China is dead scared about, capital flight. This is why they are printing like crazy trying to stimulate. This was the reason for the huge stimulus plan recently announced.

The last time the Chinese CB printed like crazy to re-inflate, Chinese products were dumped in the West, sold below production cost, this caused a huge deflationary spiral in the West forcing the US and EU to print to re-inflate. It wasn't just the 2008-9 financial meltdown. What was left after China dumped products below cost in the West was an economy which was hollowed out and seriously damaged by banking failure. The Fed went too far in Quantitative Easing. 

The EU, US and Japan are now taking liquidity out of the global economy, while China is printing again. I have no idea what this will lead to.

Even though Trump has warts, he's better than any president I've seen in my long life. I started my life in the Eisenhower era.

Those who oppose Trump, seem to want to destroy not just Trump but the nation itself.

We need a business man kind of leadership now.

In reply to by Captain Nemo d…

jt_54321 Wed, 07/25/2018 - 10:17 Permalink

The Associated Press reported that 44 airlines -- American Airlines, Delta and United -- removed explicit references to Taiwan, and instead list flights to its capital, Taipei.

Either US should  accept Taiwan an part of China ---OR--- Should try to prevent China from issuing such warnings to US based business houses...

MK ULTRA Alpha jt_54321 Wed, 07/25/2018 - 11:51 Permalink

We need to sell the F-35 right now to Taiwan. I was worried about the F-35 because of all the negative propaganda. I now know it is a remarkable technological achievement.

It's a fighter bomber, not an air superiority fighter like the F-22. The F-35 compliments the F-22.

If the US can't sell the F-35, then the advanced model F-16 needs to be taken off the Air Force flight line for Taiwan. The F-16 Taiwan flies now is an early model.

The US can sell used F-16 to Taiwan, it would help defer cost of F-35.

Also, the US needs to expedite the sale of the M1 Abrams, Taiwan asked for 200.

Taiwan is a strategic weakness of China, but if Taiwan is lost, it will be an incredible strategic strength for China. They will be able to control the sea routes to Japan.

The Chinese Communist Party's main plank is conquering Taiwan. If China loses, then it will crack the foundation of the CCP. The Chinese often brag about the maritime militia of over a million long range fishing boats. They call for a People's War using the maritime militia and there have been many reports of the maritime militia in action.

The million fishing boats are to be used in the invasion of the first and second island chains. The Chinese are preparing for war.

In reply to by jt_54321

Chupacabra-322 Wed, 07/25/2018 - 10:25 Permalink

Over 3 million working Americans have received Trump tax cut bonuses as a result of the Trump tax reform law.

But fake Elizabeth Warren wants to take that all away.

Elizabeth Warren told CNBC Democrats will end the Trump tax cuts if they take power in November.

Warren also promoted a 50% tax hike on American earners.…


Pocahantes has really gone off the Reservation.

SeaMonkeys Wed, 07/25/2018 - 10:42 Permalink

The strong dollar vs. the world is a cornerstone of the dollar being the global reserve currency, especially in the current petrodollar regime. The financialization of America could not have happened without it. Everybody lost, except the "investor/owner class" who were able to invest into the newly securitized America and watch their financial assets and real estate go up.

The rest of us were sold on the 180° turn by using identity politics and race to divert attention away from economics. Both parties were to blame. The GOP started the identity war in 1968 with Kevin Phillips' "Silent Majority" campaign for Nixon.

The Dems picked up the ball and copied the GOP with the incoming congressional class of 1974. With that freshman class, we saw the end of FDR's New Deal Democratic policies and the beginning of the current "crybaby" liberal Democratic Party.