JUST BECAUSE IT’S WEAK DOESN’T MEAN IT’S DYING
In fact, in the global market, a weak currency is a competitive economic advantage. Goods and services produced in the US and sold in the global marketplace are getting cheaper. For example, a year ago, 1 EUR could buy 1.03 worth of US goods or services. Today 1 EUR can buy $1.23 worth of US goods or services. So in the minds of savvy shoppers, any good or service originating in the US is on sale.
Early in the Trump administration there was a stark change in the Presidents tone toward the dollar. On August 31, 2017, Treasury Secretary, Steven Mnuchin, told CNBC that a weak dollar has some advantage for the US in the near term:
“Obviously, the short-term issues of the dollar have both positive and negative impacts for different parts of the economy,” Mnuchin said in an interview on Squawk Alley, “Obviously, as it relates to trade, having a weaker dollar is somewhat better for us.”
So at least some of the weakness we’ve seen in the dollar is by design. To accomplish the goal of a stronger US economy, the policy makers have clearly chosen to pursue a weak dollar strategy to boost the economy in the short term. The choices comes with consequences. The primary consequence being degraded confidence to the dollars position of power as global reserve currency. Both the short term strength to US economy and the long term hit in dollar confidence are happening.