Date: 25 Jan 2018

Just after President Nixon ended the US dollar’s convertability in 1971, precipitating a devaluation of the US currency, Nixon’s Treasury Secretary John Connally, attending a G-10 meeting in Rome, famously told his fellow finance ministers that “the dollar is our currency but your problem.” Nothing has changed in the intervening decades. That’s why traders might want to keep in mind Wednesday January 24, 2018, the day when, in Davos, President Trump’s Treasury Secretary Steven Mnuchin said that “Obviously a weaker dollar is good for us as it relates to trade and opportunities” adding that the greenback’s short term value “is not a concern of ours at all.”

Those comments might be a seminal moment, a gamechanger, perhaps officially marking an end to the notion that the US Treasury was still adhering to a “strong dollar” policy that dates back to Robert Rubin’s period as Treasury Secretary under President Clinton. Mnuchin would have known the implications of what he was saying and traders will need no reminding that policy on the US dollar is the sole preserve of the US Treasury. Perhaps the most striking aspect of the price action in the currency markets on Wednesday wasn’t that the US dollar fell but that it didn’t fall further.

Written by Neal Kimberley, External Currency Analyst.