He cited an IMF communique from last year, signed by the US, which said: “We will refrain from competitive devaluations, and will not target our exchange rates for competitive purposes.”
Backlash against Mr Mnuchin has also come from the economic community, with many saying a weaker dollar makes the country worse off because people are not living in a bubble: in the simplest terms, dollar devaluation makes imports more expensive.
More recently, Mr Mnuchin (and the President) seem to have retraced their steps slightly on this subject, unwilling to pick too hard at the idea that, in the long term, a strong currency means a strong economy.
With the rise of the renminbi as a potential reserve currency, prolonged depreciation could also severely erode the dollar’s dominant position as the world’s leading currency. The US has long gained from the dollar’s reserve status but who wants to hold onto a diminishing asset?
Coming back to Bill Clinton, he once advised to “follow the trend lines, not the headlines” and with such a deafening roar of newsflow every day, that could prove useful advice in the months ahead.
As ever, we stress our crystal ball is no clearer than anyone else’s when it comes to economics and currencies are particularly hard to predict.
I have seen convincing arguments for ongoing weakness and renewed strength when it comes to the dollar in recent weeks and views on the currency will depend on the lens through which people are looking: in the short-term, after substantial falls, it may look cheap; from a longer perspective, it still looks overvalued relative to the long-term average.
What we can say is that tracking how the dollar behaves over the next 12 months and beyond will likely give you a better perspective on overall markets than the daily ebb and flow of economic events.
John Husselbee is head of multi-asset for Liontrust
