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Trump is blamed for strong dollar, not Fed: Economist



<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "In President Trump's common complaints about & nbsp, The Federal Reserve blames the central bank for a dollar that is too strong. On June 11, he tweeted that the euro and other currencies have been devalued against the dollar, putting the United States at a major disadvantage and blaming the Fed for interest rates is "far too high." "data-reactid =" 1
5 "> In President Trump's common complaints about the Federal Reserve, he blames the central bank for a US dollar it is too strong. On June 11, he tweeted that the euro and other currencies have been devalued against the dollar, putting the United States at a disadvantage and blaming the Fed for interest rates to be "too high".

But Capital Economics analysts say Trump's own protectionist trade policy is partly responsible for the strength of the dollar

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = "If it was just & nbsp; Fed's actions as "The dollar will weaken now," said Michael Pearce, senior economist at Capital Economics in the United States. "Investors are focusing on interest rate cuts over the next few years, and that should push the dollar down," he said. (Higher interest rates usually increase the value of the dollar . "Data-response time =" 19 "> If only Fed's actions meant that the dollar would weaken right now, Michael Pearce, senior US economist economics economist, says. "Investors are focusing on interest rate cuts over the next few years, and that should push the dollar down," he says. (Higher interest rates usually increase the value of the dollar.)

<p class = "canvas-atom canvas text Mb (1.0em) Mb ( 0) – sm Mt (0.8em) – sm "type =" text "content =" But it hasn't happened. The & nbsp; dollars & nbsp; is up 2% compared to & nbsp; euro & nbsp; which is over 2% year to year from Friday morning. "Data-reactid =" 20 "> But it has not happened. The dollar is up 2% against the euro, which is over 2% year to date from Friday morning.

<p class = "canvas-atom canvas text Mb (1.0em) Mb (0) – sm Trump sees a strong dollar that destroys its economic policy goals." I want one ste rk dollars, but i want a dollar that does well for our country, not a dollar that is so strong that it makes it impossible for us to do business with other nations and take their business, "Trump & nbsp; said back in March . "Data-reactid =" 21 "> Trump sees a strong dollar hurting his economic policy goals." I want a strong dollar, but I want a dollar that does well For our country, not a dollar so strong that makes it impossible for us to do business with other nations and take their business, "said Trump back in March 19659004] If US dollars are cheaper than other currencies, foreigners buy more US products, which will further stimulate production in the US, limit imports and help reduce the trade deficit.

<p class = "canvas text Mb (1.0em) Mb (0) – sm Mt (0.8em ) – sm "type =" text "content =" Trump has lambasted the Fed & nbsp; Many times since he has been in the White House for what he says is too tight monetary policy . The Fed last rose prices in December to a target range of 2.25% to 2.5%. Trump said in an interview in March with Fox Business News that the economy would have grown over 4% instead of & nbsp; 3.1% & nbsp; if th e Federal Reserve had not raised rates in 2018. "data-response time =" 23 "> Trump has lambasted the Fed many times since he has been in the White House for what he says is too tight monetary policy. The Fed last raised prices in December to a target range of 2.25% to 2.5% Trump said in an interview in March with Fox Business News that the economy would have grown above 4% instead of 3.1% if the Federal Reserve had not increased prices during 2018.

<h3 class = "canvas-atom canvas-text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Protective policy "data-reactid =" 24 "> Protective policy

Trump's own protectionist trade policy is the cause of the dollar's latest increase, says capital economy.

Tariffs have led to a plane of security, increasing demand for secure assets such as US government bonds, thus increasing the dollar. "President Donald Trump's trade agenda … has led to some of That plane for safety. The threat of protectionism, the increased tariffs on China [those are factors that are]is playing a role in this, says Capital Economics, senior American economist Michael Pearce.

Trump correctly states that the euro and other currencies are devalued compared to the dollar, but Pearce says the weakness of these currencies is not exceptional. Fed's main currency dollar index (including euro, Japanese yen and Canadian dollars, for example) is only around 14% above the long-term average over the past 46 years.

Capital Economy Chart on Currencies

Pearce says the euro is "devalued" is not a deliberate strategy, but a by-product of the weakness of the eurozone economy. The European Central Bank has needed to keep interest rates very low for a long time to increase the economy.

<h3 class = "teacher-atom teacher's text Mb (1.0em) Mb (0) – sm Mt (0.8em) – sm" type = "text" content = " Trading deficit " data response = "40"> Trade deficit

Trump often talks about the need to raise trade deficits. "We're the bank that everyone wants to rob. And that's what they've been doing for a long time … $ 800 billion in trade deficit with other countries," Trump said in a CNBC interview on Monday.

The trade balance is the main component of the current account deficit for the US, and it has been below what is considered to be a sustainable 3% of GDP, according to the capital economy. "The account deficit is still low, so we're close to the balance. So we don't have a large current account deficit, which can further undermine the dollar," said Pearce.


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