In dozens of tweets, President Donald Trump has pressed his claim that his initial year in the White House has been great for the U.S. and its publicly traded companies. Indeed, U.S. stock markets have boomed.
But the currency markets are sending a different signal, producing the most depreciated dollar in 15 years. In contrast to Trump’s pledge to make “America first,” the U.S. was actually last in investment performance and job growth among major economies in 2017 for the first time in a decade.
Protectionism isn’t helping. Trump is the first president in modern times to assail multilateral trade agreements, including the North American Free Trade Agreement and the 11-nation Trans-Pacific Partnership that the administration spurned last year.
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While rooting for a diminished currency and waging a war on imports, most recently by means of Treasury Secretary Steven Mnuchin’s assertion on Wednesday in Davos, Switzerland, that “a weaker dollar is good for us” as he endorsed tariffs on solar cells and washing machines, Trump is eroding confidence in the U.S. and creating instability.
Lloyd Bentsen was the last Treasury Secretary to trash the dollar when he said in 1993, “I’d like to see a stronger yen.” The dollar immediately plummeted. Bentsen, a politician with populist tendencies, would have been better off employing the practice developed by his successor, Robert E. Rubin, the former Goldman Sachs trader and executive who liked to proclaim, “A strong dollar is in the interest of the U.S.” even when he didn’t really mean it. When the dollar’s appreciation was perceived to be detrimental to U.S. exports, Rubin sent an appropriate signal while preserving rhetorical consistency by saying, “We have had a strong dollar for some time now.”
As Trump and his surrogates encourage investors to dump dollar-denominated assets, Europe is the biggest beneficiary. The euro gained 14.2% in 2017, the most among 16 major currencies and the greatest appreciation since 2003 when it strengthened 20%, according to data compiled by Bloomberg.
The Bloomberg Dollar Spot Index, which tracks the performance of 10 leading currencies, showed that the dollar lost 8.5% of its value in 2017, the worst year since the index was created in 2004. In the traditional U.S. Dollar Index, which averages the exchange rates between the dollar and six currencies, the loss was 9.9% and the most since 2003.
That the greenback declined more than 9% only eight times in the past 50 years is proof that last year was anything but normal, Bloomberg data show.