FxWirePro: Dollar looks to recover from Trump shock

The US dollar is looking to gain back its lost grounds from yesterday when comments from the President triggered a selloff in the currency. In an interview with the ‘Wall Street Journal’, President Trump delivered two different blows to the dollar. First one by suggesting that the dollar has become too strong for which he thinks it is because of the market’s confidence in his presidency and the second one by refusing to rule out a second term for the current Fed Governor Janet Yellen. Fed Chair Janet Yellen is considered as one of the dovish members of the Fed’s rate-setting committee. Trump has been very critical of the Fed during his campaign. He said, “I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting, that will hurt ultimately…...Look, there’s some very good things about a strong dollar, but usually speaking the best thing about it is that it sounds good . . . It’s very, very hard to compete when you have a strong dollar and other countries are devaluing their currency.” 

However, President Trump changed his stance against China by refusing to label the Chinese as currency manipulators, which he has repeatedly said during his campaign. The president said he had changed his mind about China because it had not been manipulating its currency for months and because he did not want to hurt discussions over North Korea. He said, “I think it’s a very positive development because a lot of analysts have been pointing out that China has not been intervening to keep their currency down. China has actually been intervening to keep their currency high……..There was not really a good factual basis for calling China a currency manipulator. So this seems like a recognition of reality.”

On Trump’s comments, the US dollar index declined from 100.7 to as low 99.96 but currently, trying to recover grounds and trading at 100.17 against a basket of six currencies.