- The Trump administration's de facto weak dollar policy may be exacerbating market volatility.
- A strong dollar policy has allowed the Fed to keep interest rates low for a prolonged period, argues Rebecca Patterson of Bessemer Trust.
- Fears of inflation linked to a falling dollar are driving up bond yields and fueling expectations of potentially four interest rate hikes from the Fed this year.
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The weak dollar is adding fuel to investors' big new worry
BI PRIME: Fears of inflation linked to a falling dollar are driving up bond yields and fueling expectations of potentially four interest rate hikes this year.
Financial markets around the world are in a tizzy as higher Treasury bond yields have prompted fears the breathless run-up in stock prices has climbed too far.
But there’s another, less prominent factor, underpinning renewed market volatility, which is affecting asset prices around the globe: fears of a currency war started by US official rhetoric on the benefits of a weaker dollar.
Treasury Secretary Steve Mnuchin sent the strongest signal yet last week in comments welcoming the dollar’s decline as beneficial to US exports. The comments were highly unusual for a Treasury secretary and came on top of new protectionist tariffs on solar panels and washing machines — and thus seen as part of a bigger policy agenda.
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"It’s the beginning of at least a verbal currency war," Nouriel Roubini, professor of economics at New York University, told Bloomberg Television. "Fundamentally this administration wants a weak dollar."
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