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US Election Series: Trump repatriation - another reason to long dollar

In a previous article, we suggested going long the dollar if Donald Trump wins the Presidency. We believe his winning the White House would begin a period, where the dollar is not supported just by monetary policies but fiscal policies too. Three major reasons, which we shared, that would be responsible for the upside in the dollar are,

  • The hawkish outlook of a new Federal Reserve Governor under Trump administration.
  • Lowering of US trade deficit as it has been one of the major sources for the dollar in the financial market.
  • Utilization of domestic energy resources that would, in turn  reduce the petrodollar in the market.

Now, add another one to the above mix; that is Trump repatriation. It is true, what Mr. Trump said that companies are not bringing back the money earned into the country as it would cost high amount of taxes. He has proposed that he would bring down the cost to as low as 10 percent so that trillions of dollars can return home. He suggested that the amount could be somewhere between $2.5 trillion to $5 trillion. Though these numbers look a bit on the higher side, if such a step is taken, the repatriation would be very significant.

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