Dollar caught in crossfire as Trump talks currency wars

[webfact]

Dollar caught in crossfire as Trump talks currency wars

By Wayne Cole

REUTERS

 

The dollar sign (R) is seen alongside the signs for other currencies above a currency exchange shop in Mongkok shopping district in Hong Kong, China, October 30, 2014. REUTERS/Damir Sagolj/File Photo

 

SYDNEY (Reuters) - The dollar was put on the defensive in Asia on Wednesday after the Trump administration accused Germany and Japan of devaluing their currencies to gain a trade advantage, fuelling a risk-off mood that also kept stocks subdued.

 

The U.S. currency suffered its worst January in three decades after President Donald Trump complained that every "other country lives on devaluation."

 

Just hours earlier his top trade adviser said Germany was using a "grossly undervalued" euro to exploit its trading partners. The accusations drew rebuttals from German and Japanese officials, but looked likely to run for some time.

 

"Suspicions that Washington may increasingly focus on the value of the dollar were catapulted into the limelight," ANZ analysts said in a note.

 

"The early policy implication is that dollar competitiveness could have a prominent role to play in Trump's 'America First' agenda."

The dollar did recoup a little of its losses as the Asian session wore on, edging up to 112.94 yen from a low of 112.08, though that remained well short of Monday's 115.01 peak.

 

The euro was firm at $1.0793 <EUR=>, having been as high as $1.0812 and a long way from Monday's trough of $1.0617. Against a basket of currencies, the dollar <.DXY> stood at 99.651, having ended January with a loss of 2.6 percent.

 

The jump in the yen kept Tokyo stocks <.N225> flat, while MSCI's broadest index of Asia-Pacific shares outside Japan <.MIAPJ0000PUS> was 0.06 percent lower.

 

Chinese markets were still on holiday but surveys from the Asian giant showed manufacturing and services activity continued to expand in January.

 

Exports from tech bellwether South Korea also grew at the fastest pace in almost five years, another sign the global economy had been on the mend before all the talk of U.S. protectionism darkened the air.

 

FED ON HOLD

 

Investors' hopes for a fiscal boost to the world's largest economy under Trump have been tempered by controversial and protectionist policies that have seen him suspend travel to the United States from seven Muslim-majority countries.

 

The policy uncertainty only added to expectations the U.S. Federal Reserve will keep interest rates steady when it concludes a two-day meeting later Wednesday.

 

The setback for Wall Street has been limited so far.

 

While the S&P 500 fell on Tuesday for a fourth consecutive session, it still ended higher for the month. The Dow <.DJI> dipped 0.54 percent, while the S&P 500 <.SPX> lost 0.09 percent and the Nasdaq <.IXIC> 0.02 percent.

 

Apple <AAPL.O> shares also jumped 3.3 percent after the bell as sales of iPhones beat expectations, helping lift Nasdaq e-mini futures <NQc1> up 0.2 percent.

 

Safe-haven bonds benefited from all the unease over Trump's policies and yields on 10-year Treasury debt <US10YT=RR> eased to 2.46 percent from 2.48 percent early in the week.

 

The retreat in the dollar also boosted a range of commodities, with copper touching a two-month high <CMCU3>.

 

Brent crude oil <LCOc1> for April was quoted 10 cents lower at $55.48, while U.S. crude <CLc1> eased 8 cents to $52.73.

 

(Reporting by Wayne Cole; Editing by Eric Meijer & Shri Navaratnam)

 

-- © Copyright Reuters 2017-02-01

[Kasset Tak]

USD has been the fallback/common currency for a long time in business but as US government has a deficit of $ 150 trillion ($ 150.000.000.000.000) and Trump's movements are annoying to the rest of the world the value of the USD might plummet.Lets face it, more and more companies and countries are using one of their local currency in export deals and that will weaken the status of USD in the end!

[YeahSiam]

A "strong" US dollar is incompatible with the Trump reflation plan - this will go down as the start of his weak dollar policy.

 

Expect the Yanks to join the Brits complaining about THB exchange rates before the year is out

 

 

[smedly]

2 hours ago, YeahSiam said:

A "strong" US dollar is incompatible with the Trump reflation plan - this will go down as the start of his weak dollar policy.

 

Expect the Yanks to join the Brits complaining about THB exchange rates before the year is out

 

 

well it would be interesting to see if the baht drops with it as it usually does or the Thai central bank might be forced to take action to reduce its value

 

Things are changing fast on the world stage.

[does]

4 hours ago, Kasset Tak said:

USD has been the fallback/common currency for a long time in business but as US government has a deficit of $ 150 trillion ($ 150.000.000.000.000) and Trump's movements are annoying to the rest of the world the value of the USD might plummet.Lets face it, more and more companies and countries are using one of their local currency in export deals and that will weaken the status of USD in the end!

The world debt clock shows the US government has a debt of nearly $20 trillion. The figure you mention - $150 trillion - does that include private debt and/or "unfunded liabilities" including entitlement programs?

 

Apart from that, I would agree that the status of the US$ as the world's reserve currency will slowly end.

[Emster23]

Pretty clever, Donny. make dollar worth half what it is today and viola! US made goods cheaper, and average Americans won't be able to afford any imports. Almost like invisible hand, grabbing the Purse (or whatever) strings

[Jingthing]

5 hours ago, YeahSiam said:

A "strong" US dollar is incompatible with the Trump reflation plan - this will go down as the start of his weak dollar policy.

 

Expect the Yanks to join the Brits complaining about THB exchange rates before the year is out

 

 

Could be. I remember trump saying how great it was for the UK after Brexit when the pound tanked. The thing is, trump is no economist so as far as economic tactics, you can't trust him as far as you can throw him. 

[Srikcir]

In the last week the baht has gained against the dollar to 35.1 from 35.6. Not good for Thai exports to the US should the trend continue. The Federal Reserve holding unchanges the interest rate will help - but isn't that currency manipulation?

[Jingthing]

4 minutes ago, Srikcir said:

In the last week the baht has gained against the dollar to 35.1 from 35.6. Not good for Thai exports to the US should the trend continue. The Federal Reserve holding unchanges the interest rate will help - but isn't that currency manipulation?

Most likely Yellen will be wanting to raise interest rates. Good chance trump fires Yellen especially considering she was featured in one of his "evil globalist conspiracy theory" campaign ads (that many saw as antisemitic as well). 

[sanukjim]

Between Trump and Brexit the Euro could be about as valued as The Mexican Peso soon.

[louse1953]

It's everybodies fault but the soon to be "great again"country.

[Grouse]

2 hours ago, sanukjim said:

Between Trump and Brexit the Euro could be about as valued as The Mexican Peso soon.

No; both the UK and the USA want a strong Euro! You know, reduce sales of Mercs in Washington and London and increase sales of Rolls Royce and, er, Cadillacs?

[elgordo38]

9 hours ago, webfact said:

The U.S. currency suffered its worst January in three decades after President Donald Trump complained that every "other country lives on devaluation."

Well he did say the dollar was to high. It just became collateral damage and ended up suiting Trumps purposes. 

[frankv42]

3 hours ago, Jingthing said:

Most likely Yellen will be wanting to raise interest rates. Good chance trump fires Yellen especially considering she was featured in one of his "evil globalist conspiracy theory" campaign ads (that many saw as antisemitic as well). 

Can't fire her. Her term is up next year and he can nominate another to be Fed Chairman.

[Jingthing]

1 minute ago, frankv42 said:

Can't fire her. Her term is up next year and he can nominate another to be Fed Chairman.

If he can't fire her, he can PRESSURE her to resign. The tweeting bully ... that's how he rolls. 

[alanrchase]

Did Trump no complain that the Fed should have raised interest rates earlier during hi campaign?

Sent from my SM-A500F using Thaivisa Connect mobile app

[YeahSiam]

4 hours ago, alanrchase said:

Did Trump no complain that the Fed should have raised interest rates earlier during hi campaign?

Sent from my SM-A500F using Thaivisa Connect mobile app
 

Yes, but it suited him to play that line at the time.

I think that, somewhere in between then and now, someone must have explained why a strong dollar will hamper his efforts to bring all those high-paying manufacturing jobs back to American from erm.......Bangladesh.

[Srikcir]

15 hours ago, sanukjim said:

Between Trump and Brexit the Euro could be about as valued as The Mexican Peso soon.

Between Trump and Mexico, the USD might take a tumble as well.

Trump just threatened Mexican President Pena Nieto to send U.S. troops into Mexico to stop "bad hombres down there" unless the Mexican military does more to control them itself, according to an excerpt of a transcript of the conversation obtained by The Associated Press.

Quote

 

http://time.com/4657474/donald-trump-enrique-pena-nieto-mexico-bad-hombres/

 

That's called "invasion" of a sovereign nation who is a close trading partner and ally. What's next - a ban on Mexican travellers?

 

[heybruce]

The dollar is strong because, under Obama, the US economy became the best performing developed economy in the world and one of the few with interest rates that are above zero. 

 

If Trump can succeed in weakening the dollar, probably through a combination of high deficits and throttling global trade, the successful "bad hombres" around the world--oligarchs from corrupt nations--will use the cheap dollar to purchase luxury properties in the US, the kind that Trump's fortune is base on.  Of course the high deficits will hurt the US in the long run, and the reductions in global trade will make the world poorer, but he'll come out ahead.

[chilli42]

The dollar is strong because all the other alternative investments are worse than the US.  Put your money in near zero or negative yield  treasuries (Europe and Japan) ... or put them in the US with a 2.5% yield.  Stock market?  Where else?Maybe you could go out and buy a boat load of commodities like oil and such.... prognosis for commodities should be excellent with global trade in decline.  How about emerging markets ... well they can't sell their commodities and they have borrowed most of their money in US$ which are now at a record high ... no maybe pass on financial suicide for now.  China is fighting like hell to keep the price of the RMB up ... why not put some money there ... what to do if they fail to hold the RMB (which the US beleives is artificially low already). The US$ is high and will remain so because nearly everything else sucks so bad.  The Great Tangerine does not like a high dollar for many reasons ... not the least of which is that it will slow domestic growth and import deflation.  Thing is, it can't be fixed by blaming everyone else as they are already drowning in problems.  The US will eventually be dragged down by the problems in the rest of the world, even then the US$ will remain strong relative to other major currencies.  As for Thailand ... as they say s#%t rolls downhill and it's coming your way as soon as end 2017 (my guess).

 

Oh, BTW being long on US$/US$ denominated investments is not a bad place to be right now ... maybe not the stock market though.

[YeahSiam]

2 hours ago, chilli42 said:

or put them in the US with a 2.5% yield.  Stock market?  Where else?Maybe you could go out and buy a boat load of commodities like oil and such.... prognosis for commodities should be excellent with global trade in decline.  How about emerging markets ... well they can't sell their commodities and they have borrowed most of their money in US$ which are now at a record high ... no maybe pass on financial suicide for now.  China is fighting like hell to keep the price of the RMB up ... why not put some money there ... what to do if they fail to hold the RMB (which the US beleives is artificially low already). The US$ is high and will remain so because nearly everything else sucks so bad.  The Great Tangerine does not like a high dollar for many reasons ... not the least of which is that it will slow domestic growth and import deflation.  Thing is, it can't be fixed by blaming everyone else as they are already drowning in problems.  The US will eventually be dragged down by the problems in the rest of the world, even then the US$ will remain strong relative to other major currencies.  As for Thailand ... as they say s#%t rolls downhill and it's coming your way as soon as end 2017 (my guess).

 

Oh, BTW being long on US$/US$ denominated investments is not a bad place to be right now ... maybe not the stock market though.

2.5% yield with inflation already over the Fed's 2% target (and that's just the official rate) and with a new administration fixing to issue another $1 trillion in debt to fund an infrastructure stimulus?

Yeah, right

 

Emerging market equities and precious metals will do me just fine, thanks.

 

[ExpatOilWorker]

On 1/2/2560 at 3:17 PM, does said:

The world debt clock shows the US government has a debt of nearly $20 trillion. The figure you mention - $150 trillion - does that include private debt and/or "unfunded liabilities" including entitlement programs?

 

Apart from that, I would agree that the status of the US$ as the world's reserve currency will slowly end.

 

Replaced with what? Chinese Redback? Euro and all the debt in southern Europe?

The mighty dollar will outlive all of us.

[ExpatOilWorker]

3 hours ago, chilli42 said:

The dollar is strong because all the other alternative investments are worse than the US.  Put your money in near zero or negative yield  treasuries (Europe and Japan) ... or put them in the US with a 2.5% yield.  Stock market?  Where else?Maybe you could go out and buy a boat load of commodities like oil and such.... prognosis for commodities should be excellent with global trade in decline.  How about emerging markets ... well they can't sell their commodities and they have borrowed most of their money in US$ which are now at a record high ... no maybe pass on financial suicide for now.  China is fighting like hell to keep the price of the RMB up ... why not put some money there ... what to do if they fail to hold the RMB (which the US beleives is artificially low already). The US$ is high and will remain so because nearly everything else sucks so bad.  The Great Tangerine does not like a high dollar for many reasons ... not the least of which is that it will slow domestic growth and import deflation.  Thing is, it can't be fixed by blaming everyone else as they are already drowning in problems.  The US will eventually be dragged down by the problems in the rest of the world, even then the US$ will remain strong relative to other major currencies.  As for Thailand ... as they say s#%t rolls downhill and it's coming your way as soon as end 2017 (my guess).

 

Oh, BTW being long on US$/US$ denominated investments is not a bad place to be right now ... maybe not the stock market though.

 

Totally agree with you and Asia haven't had a financial crises since 1997. Malaysia is already bleeding foreign reserve and have a hard time keeping their economy together. If the debt mountain in China start to sink into the mud, a 2.5% dollar denominated yield might look golden.

[YeahSiam]

9 minutes ago, ExpatOilWorker said:

 

Replaced with what? Chinese Redback? Euro and all the debt in southern Europe?

The mighty dollar will outlive all of us.

Replaced with Strategic Drawing Rights (SDRs) (Obviously, it'd be called something far catchier and backed by more than the promise of the US Treasury

No one thinks it could happen but who foresaw 2008 happening?

[Grouse]

I'd never heard of SDRs. One learns something new every day. Thanks!

 

Interesting to look at how key currencies have moved against SDR over several years. All becomes clear- at least to an innocent bystander like me ? 

[YeahSiam]

On 2/1/2017 at 6:15 AM, smedly said:

well it would be interesting to see if the baht drops with it as it usually does or the Thai central bank might be forced to take action to reduce its value

 

Things are changing fast on the world stage.

Well it didn't a few years back when it stood at 27 or 28 baht to the dollar.

[maewang99]

be hedged. this knucklehead... and future Democratic knuckleheads.. are looking for Bogeymen to provide misdirection from our real problems.

what problems?

just a mere 1,000 US dollars in entitlements per month... will cost the USA a TRILLION per year simply because there are 80 million baby boomers... and our entitlements... especially when we get into our 80's and 90's... those of us that do.... and there will be those of us who do.....  is worse than funding WW2... by far... and these were the babies BORN just after WW2.... and both sexes of which entered their prime working and tax paying years during the magical Reagan and Clinton administrations... which many folks just discard (the significance of this demographic)... and are doing so yet again.

and a trillion... let alone multiples of them in benefits as well as duration until 80 million boomers are dead... is serious.  it is an unfunded and unrecorded public liability. 

so the bogeymen nonsense will continue.... and here we have a US president actually trying to talk DOWN the US Dollar.  OMG.

and a Thai Baht that was normally 20 to the US dollar.. just as the USA was beginning to run twin deficits... and the shale gas miracle won't be a cure by even 1/10,000th.

     

       

[smedly]

the reality is that Thailand floats in a sea of currency,  they as a country have no influence on were the baht goes unless they take extreme measures and interfere with Bhat valuations, there are probably a few influential people in Thailand who are watching very carefully what is going on in the US..............................the clear message is (for the wise ones) that the new president is looking to devalue to Dollar - in fact what he is doing is playing the same game as the rest of them especially China who have been playing this game for years.....would I want to hold dollars right now ..................nope, what currency would I want to be holding.............well I have got to go with Sterling, the Euro is poison right now simply because the a'hols in Brussels will try to damage a reasonably good relationship with the UK just to make some sort of very poor point......their words - the British people will suffer.............sounds a bit like war talk - if you won't submit to our rules we will make you pay..... <deleted> is that all about, at the end of it the EU and all its member states will lose big time if it is allowed to continue, the bravado face saving talk is finished..............the EU needs the UK and a continued trade deal that works for all

 

and as for the current state of the EU................Rant warning but all about currency

 

Oh and try getting 60 billion from my UK wallet...................really, how about Germany and Austria  paying what it owes both in monetary value and also compensation for the .......MILLIONS of lives that were lost and people  slaughtered in 2x world wars that you started............someone want to tally that one up.......................it wasn't that long ago and it is worth remembering that there are still people living today that lived it to the full in that hell on earth

 

 

I said many times before and I will keep saying - the UK voted to join the EEC back then and it was a good idea, all the other treaties (crap) that followed was never put to the British people - all these so called (nice word) treaties .............they were not treaties - they were far reaching nasties that the British people had no say what so ever, it was a power grab on a scale that only war would have accomplished and yet our government representatives over the years decided  that we should comply..............really ?

 

Some of the stuff was good but an awful lot of it was a blatant power grab ..........the sort of stuff that is usually the result of a war and the victor takes all, it just went too far and the British people have said .....no more

 

ask this question - all things being equal - why should Germany be doing better than Greece ?.....why

 

Why should Germany be doing better than France ?........ why

 

 

Why Should Germany be doing better than the UK ?..........why

 

Because .....................................they own the EU....yes two wars millions dead and they got it, we handed it to them on the back of a trade deal (EEC) that went terribly wrong

 

I hope they are willing to pay for the debt they created when it all implodes - which is going to happen very soon - I give it 12 months or maximum 24 months

 

who is going to pay

 

seems to me that Germany owes a lot of money they have accumulated over the last century and they are still adding to it today

[Grouse]

3 hours ago, smedly said:

the reality is that Thailand floats in a sea of currency,  they as a country have no influence on were the baht goes unless they take extreme measures and interfere with Bhat valuations, there are probably a few influential people in Thailand who are watching very carefully what is going on in the US..............................the clear message is (for the wise ones) that the new president is looking to devalue to Dollar - in fact what he is doing is playing the same game as the rest of them especially China who have been playing this game for years.....would I want to hold dollars right now ..................nope, what currency would I want to be holding.............well I have got to go with Sterling, the Euro is poison right now simply because the a'hols in Brussels will try to damage a reasonably good relationship with the UK just to make some sort of very poor point......their words - the British people will suffer.............sounds a bit like war talk - if you won't submit to our rules we will make you pay..... <deleted> is that all about, at the end of it the EU and all its member states will lose big time if it is allowed to continue, the bravado face saving talk is finished..............the EU needs the UK and a continued trade deal that works for all

 

and as for the current state of the EU................Rant warning but all about currency

 

Oh and try getting 60 billion from my UK wallet...................really, how about Germany and Austria  paying what it owes both in monetary value and also compensation for the .......MILLIONS of lives that were lost and people  slaughtered in 2x world wars that you started............someone want to tally that one up.......................it wasn't that long ago and it is worth remembering that there are still people living today that lived it to the full in that hell on earth

 

 

I said many times before and I will keep saying - the UK voted to join the EEC back then and it was a good idea, all the other treaties (crap) that followed was never put to the British people - all these so called (nice word) treaties .............they were not treaties - they were far reaching nasties that the British people had no say what so ever, it was a power grab on a scale that only war would have accomplished and yet our government representatives over the years decided  that we should comply..............really ?

 

Some of the stuff was good but an awful lot of it was a blatant power grab ..........the sort of stuff that is usually the result of a war and the victor takes all, it just went too far and the British people have said .....no more

 

ask this question - all things being equal - why should Germany be doing better than Greece ?.....why

 

Why should Germany be doing better than France ?........ why

 

 

Why Should Germany be doing better than the UK ?..........why

 

Because .....................................they own the EU....yes two wars millions dead and they got it, we handed it to them on the back of a trade deal (EEC) that went terribly wrong

 

I hope they are willing to pay for the debt they created when it all implodes - which is going to happen very soon - I give it 12 months or maximum 24 months

 

who is going to pay

 

seems to me that Germany owes a lot of money they have accumulated over the last century and they are still adding to it today

Off topic rant

[IAMHERE]

On 2/1/2017 at 10:39 AM, YeahSiam said:

A "strong" US dollar is incompatible with the Trump reflation plan - this will go down as the start of his weak dollar policy.

 

Expect the Yanks to join the Brits complaining about THB exchange rates before the year is out

 

 

I don't think I'll have to wait that long. The exchange has tumbled from 36 to the dollar down to 35 to the dollar; already big downward movement in the dollar.