7 feb
2020
12:17
Markets
Washington wants USD down: what lies ahead of the US currency?

Once again, Trump insists on the weakening of the national currency, since it may help US companies increase their competitiveness. Nevertheless, the fact that the FRS had reduced the key interest rate three time over a year and saturated the country's economy with liquidity did not make the situation better. A new plan is to be implemented.

US President is concerned about the unreasonably high USD exchange rate that hinders the export of US goods and causes the growth of trade balance deficit.

By slightly reducing the value of USD, the USA will make their products more attractive for foreign buyers, production will be bolstered to grow and deficit will decrease.

 Trump pointed out many times that the EU and PRC force-reduce the exchange rates of their national currencies in order to get an advantage over US companies. Following this example, the Federal Reserve was reducing the rates throughout the past year. However, the USA has almost run out of reduction opportunities—the rates have fallen to their historical minimums.

 The country needs another plan. It has one. To increase the competitiveness of US manufacturers, it is planned to impose high duties on the import of goods from the countries reducing their FX rates too much. Mala fide competitors will be detected by the Department of Commerce and companies themselves on the basis of complaints about unfair foreign competitors.
Of course, the additional duties will, first of all, be imposed on imports from China and Japan, followed by European products. Trump, however, encourages the FRS to keep reducing the interest rate to as low as a negative level, like in the EU. Such policy contradicts the provisions of the first phase of the agreement signed with China, according to which competitive devaluation is prohibited.

Experts believe that, if Trump's plans are implemented in 2020, USD will fall by 3–5%. At the moment, the currency is stable. The EUR/USD paid is traded at $1.10363. RUB slightly strengthened to USD and is currently traded at ₽62.8404.