Following speculation that Steven Mnuchin’s market-moving Wednesday comments were misconstrued, with none other than Wilbur Ross saying that the Treasury Secretary did not suggest the US was now pursuing a weak-dollar policy, Mnuchin was back on the wires again this morning in a panel appearance at Davos, where he mostly repeated his previous comment, stating that “a weaker dollar is good for us as it relates to trade and opportunities,” and in terms of trade imbalances, which of course is factually true although it was still unclear if equates with new US policy. For the answer, we may need Trump who just landed at Davos, to weigh on that.
Addressing whether the US has a dollar target he said, “My comments have been that in the short term, where the dollar is not a concern of mine, that it will fluctuate. In the short term there’s obviously benefits and issues of a lower dollar.”
After that confusion “explanation”, Mnuchin was confused how there could be any confusion over his remarks: “I thought my comment on the dollar was actually quite clear yesterday, I thought it was balanced and consistent with what I said before” he told reporters in Davos. He further said that “It’s a very very liquid market and we believe in free currencies. There’s both advantages and disadvantages on where the dollar is in the short term.“
Addressing the elephant in the room, he said that “we want free and fair and reciprocal trade. So I think it’s very clear. We’re not looking to get into trade wars. On the other hand we are looking to defend America’s interests.”
Mnuchin’s clarification came shortly after IMF Managing Director Christine Lagarde spoke to Bloomberg at Davos and said USD value is determined by the market, while suggesting that Mnuchin should explain his comments in which he appeared to back a weak dollar, adding that U.S. tax cuts will probably cause the world’s reserve currency to rally.
“I really hope that Secretary Mnuchin has a chance to clarify exactly what he said,” Lagarde said. “The dollar is of all currencies a floating currency and one where value is determined by markets and geared by the fundamentals of U.S. policy.”
She also said that trade is a very significant engine of growth and protectionist measures don’t help trade or growth.
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And then, just to make things even more confusing, Mnuchin said in another panel discussion that he thinks that “Trump shares a relaxed view on the dollar” suggesting that a weaker dollar is in fact a matter of US policy.
Whether Mnuchin’s “clarification” was meant to boost the dollar or to double down on his “weak dollar” policy was unclear, but while the Bloomberg dollar index staged a feeble rally around the time of Mnuchin’s comments it has resumed its slide, and continued to trade at three year lows.
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