The US dollar is on track for a bad month as President Trump expressed his opinion on other countries devaluing their currencies – with his trade adviser specifically attacking the euro. The President, after meeting with several top executives of pharmaceutical companies recently, told the process they were shipping jobs overseas because of unfair currency devaluation by other countries. Additionally, Peter Navarro, his top trade adviser, shortly before expressed his opinion to the Financial Times of Germany undervaluing their currency to obtain an unfair advantage over the US and the rest of the Western world. Both comments made within hours of each other, are leading analysts to believe the greenback could be facing some significant devaluation, thus it saw a significant selloff resulting in the dollar seeing the worst monthly percentage drop in January in three decades.
The dollar took significant hits in Asian markets today after in addition to Germany, Trump also attacked Japan for devaluing its currency. The bearish mood spread worldwide and stocks were also subdued as investors pondered the impact a weakening dollar would have on stocks. Analysts are under the impression that Trump believes a weakening dollar would have a positive impact on Trump’s “America First” plan as it makes exports relatively cheaper for neighboring countries. The euro saw in increase this month trending upwards, while the dollar wound up down 2.6% on the month when compared to a basket of its closest rivals.
Some of the dollar selloffs resulted in a stronger Yen, and helped keep Tokyo stocks stable. The expanding manufacturing and services market continued its growth in China, and positive indicators in their economy could point towards a stronger Yuan, at least for the time being. Exports from South Korea were growing at the fastest pace in nearly five years, and since their economy is based largely around technology it was an additional positive indicator before protectionist policies by Trump began affecting currency valuation and trade.
Investors are also taking the travel restrictions from several Middle Eastern and African nations as protectionist policies that might dim the hopes of a fiscal boost of the world’s economy. The policy likely means the Federal Reserve will be inclined to keep interest rates steady after its meeting concludes on Wednesday, as previously expected. Wall Street has not seen significant losses yet as investors wait to see the effects before jumping to conclusions and exiting the market – though the S&P fell over the last few sessions, it still ended the month positive. Safe haven bonds have been the biggest benefactor of the geopolitical unrest, with 10-year Treasury debt seeing a large uptick in demand.