Last year President Trump announced that the stock market index had seen the best gains ever since he started his residency in the White House. In January 2018, he said it once again, and even claimed that he helped generate six trillion dollars in value. While POTUS can freely claim that he made the U.S. economy great again last year, the numbers showed otherwise.
Bloomberg reported that last year, the dollar lost 10% of its value against the Euro, and 5.5% against the Yuan. It was the second worst performing currency after the New Zealand dollar, and the greenback’s drop in 2017 was the worst in more than a decade. In August 2017, the dollar declined to a 15-month low against several major currencies traded in Forex.
There are many factors that affect the power of the dollar. FXCM states that news about global policy movements is one indicator, and this can be clearly seen happening with Trump’s “America first” agenda. In the same article by Bloomberg, it was stated that the “America First” concept is actually hurting the dollar instead of helping the economy. In addition to policy movements by the POTUS, the weak U.S. economic growth at the start of 2017 is also to blame for the weak dollar.
“Today, your key driver is the fact that Trump is facing an existential threat here,” said the director of global market strategy at Cambridge Global Payments Karl Schamotta.
Schamotta is pointing to the political issues hounding the U.S. government when rumors started to circulate about the POTUS sharing confidential information with a Russian official.
A lot of investors believed at first that Trump’s governance, along with a Republican-majority congress, would finally free the U.S. economy from the slump and drive the U.S. Fed to increase interest rates for borrowers. However, Trump’s legislative priorities, along with the bullish economic growth in Europe, are preventing an interest rate hike from happening. The U.S. dollar index for one, which accurately pegs the greenback against other major currencies, took a plunge as early as January 2017.
Last year, the Trump administration’s feeble commitment to its allies has affected the dollar tremendously. Economists also suggest that his quick temper and trigger-happy Twitter posts have weakened the U.S. dollar further to the point that investors aren’t sure if the U.S. government can be trusted as a security guarantor. The constant finger pointing towards Trump’s government by the press, as well as recent literature that is now being published about Trump’s incompetence, also diminish the greenback’s reputation as an investable asset.
Trump says that he is in favor of a weaker dollar because it helps level the playing field with other currencies in terms of competition. However, recent historical data shows that the greenback is not being devalued because of any existing policy by the previous government. The contrary is actually happening, and analysts blame Trump for being one of the major causes of the dollar’s devaluation today.