WASHINGTON DC – The dollar weakened after statements by US President Donald Trump, directed against the Federal Reserve and China. The market interpreted the words of the US president as a possible preparation for an intervention.
On his Twitter account, Trump wondered who was a major enemy of the United States: China or Jerome Powell, president of the Fed.
“As usual, the Fed did NOTHING! It is incredible that they can “speak” without knowing or asking what I am doing, which will be announced shortly. We have a very strong dollar and a very weak Fed. I will work “brilliantly” with both, and the U.S. will do great…,” Trump wrote on August 23 and added: “….My only question is, who is our bigger enemy, Jay Powell or Chairman Xi??”
….My only question is, who is our bigger enemy, Jay Powell or Chairman Xi?
— Donald J. Trump (@realDonaldTrump) August 23, 2019
Trump’s tweets along with Jerome Powell’s speech caused the dollar to weaken considerably over six major currencies.
The statements by the US president also fueled speculation that the Treasury Department could be preparing an intervention in the currency market to weaken the dollar.
The recognition of China as a “currency handler” can serve Trump as a formal reason for the intervention.
However, it would be an open currency war, to which China would undoubtedly respond, and strongly as we have become accustomed to.
According to a senior official from a London-based Chinese bank, cited by the Financial Times, the US intervention in the foreign exchange market “would be interpreted as a political act and would destabilize the markets.” The political consequences would be “unprecedented,” the media source added.
However, it is also possible that it is a Trump lantern. It is not the first time that the publications of the US leader on Twitter affect rates.