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Dollar Drops Amid Trump’s Inauguration

Dollar Drops Amid Trump’s Inauguration

On 20 January 2017, the US dollar (against the Chinese Yen) peaked at approximately 115.40; on 23 January, it declined following Donald Trump’s inauguration and levelled off at 113.50. In the aftermath of Mr. Trump’s election victory, US stock markets surged, attributed to the New York businessman’s campaign promises of regulatory and tax roll back, as well as higher infrastructure spending.

The President gave minor details of his fiscal arrangements and emphasised his ‘America First’ approach to foreign policy. The USD has also fallen against its Group of 10 peers. Rodrigo Catrill, a currency strategist for the National Australia Bank, stated, “[c]aution is the theme for the week as the market is susceptible to Trump and his policy announcement”. Another currency strategist, at Morgan Stanley, claimed that Mr Trump’s inauguration speech “failed to reach out to local political opponents and international partners” and that this caused the dollar to weaken.

US Treasury Secretary nominee Steven Mnuchin stated, “an excessively strong dollar could have a negative short-term effect on the economy.” He continued, “It increases purchasing power, leading to dollar gaining strength relative to other currencies, assets priced in those currencies would become cheaper on a dollar basis”.

 

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