Trump’s “Killing Us” Statement

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Trump’s “Killing Us” Statement Sees The Dollar Strength Weaken In The Face Of Other Greenbacks

Since the beginning of the year, the superiority of the dollar has been continually rising and operating at a 14-year high compared to all other leading global currencies. But the president-elect isn’t happy about it. In an interview with the Wall Street Journal, Donald Trump argued that the strength of the dollar is “killing us” as US companies can’t favourably compete with the rest of the leading global economies.

The remarks seem to have been quickly taken up by the currency markets, evidenced by the fact that the dollar fell, almost immediately, by 0.3 per cent on the dollar index. The fall, on the other hand, saw a sharp gain among the competing global currencies led by the Canadian dollar and Russian Rouble that gained 1 percent each as well as the Japanese Yen gaining 0.9 percent. Note that a decline in the currency strength is in most cases believed to result in a corresponding increase in export market gains.

Trumps growth strategy and its effects on global currencies

The trump administration is keen on delivering their economic growth promises, but they can only deliver if the American companies remain competitive enough. The administration is, therefore, considering every possible avenue to ensuring the competitiveness of the country’s businesses in the global exports markets. Going with the latest Trump remarks, this will involve pressuring other world economies like China that is believed to be devaluing the currency to remain weak and more competitive to the dollar.

In the near future, the Trump administration will probably start "devaluation" processes for the Dollar to boost the country’s exports that have been left to the mercies of the highly devalued Yuan and shaken up Pound and Euro.

Effects of either decision

While the administration will most definitely adapt either of these economic growths and competitiveness-boosting, strategies will have catastrophic retributions on the global economy. For instance, analysts the provocation of the Chinese economy by the upcoming administration may trigger a full-blown trade war in the globe. Evidenced by the fact that the Peoples Bank Of China has already issued out Forex Exchange strategies that involve massive Investments with the American allies and foes such as Europe, Asia, and the Middle East.

On the other hand, devaluation of the dollar can only be effective if the rest of the world currencies don’t follow suit. Otherwise, it would be an act of futility. Additionally, such a move will also the currently cheaper imports into the country and the government, therefore, has first to decide on which of the two, imports and exports is more important to economic development or how to strike a balance between the two.

Should the other countries fail to reiterate to the devaluation of the dollar, they would stand to gain immensely in the dollar index ratings but also loose on their competitiveness on global trade. As an investor, you, therefore, to remain keen of these developments so as to understand when and where to invest given the looming volatility expected in the currency markets in the first few days of the Trump administration.

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