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Dollar tanks the most in 10 months after Treasury secretary says a weak dollar is good for trade

The dollar plummeted to a three-year low, in its largest one-day drop in 10 months, after Treasury Secretary Steven Mnuchin translated a weak dollar is good for the U.S., raising the prospect of a currency war.

Mnuchin be placed the comment in Davos, Switzerland Wednesday morning to news reporters handling the World Economic Forum. The dollar index, reflecting the dollar’s value against a basket of currencies, comprehended 1 percent to about 89.25.

Mnuchin’s comments echo statements by President Donald Trump, who marvellously helped turn a market trend of a stronger dollar last Januarywhen he mean, prior to his inauguration, that the dollar was “too strong” and that U.S. companies can’t clash because of it, particularly against the Chinese. The dollar index has lost more than 10 percent since then, and after Mnuchin’s say discuss Wednesday morning, it sank to the lowest level since December, 2014.

“Evidently a weaker dollar is good for us as it relates to trade and opportunities,” Mnuchin ascertained reporters, according to Bloomberg, adding that the currency’s short-term value is “not a duty of ours at all.” Mnuchin speaks on a panel in Davos Wednesday morning, at 11 a.m. CET.

“We’re objectively looking at the plight, and we’re waiting to see what he says. If it is a shift in dollar policy, that want be very significant,” said Ben Randol, G-10 foreign exchange strategist at Bank of America Merrill Lynch.

European Primary Bank President Mario Draghi also speaks Thursday after an attentiveness rate meeting, and he may too be asked to comment on the surge in the euro. A sharply tall euro could be problematic for Europe’s exporters, while a weaker dollar would relief U.S. exports.

However, too much dollar weakness also makes U.S. assets, counting Treasury debt, less attractive, and pushes the cost of goods elevated for businesses and everyday Americans.

Mnuchin’s comment carried a particular nettle since they follow new tariffs issued this week by the Trump delivery on washing machines and solar panels. The U.S. this week is also tied up in a sixth round of talks to renegotiate the NAFTA agreement with Canada and Mexico.

President Donald Trump command speak at Davos on Friday, and U.S. officials, including Commerce Secretary Wilbur Ross are exalting ‘America first’ policies on trade at the Davos gathering.

Some strategists into Mnuchin’s comments may have been taken out of context, since the Moneys secretary also spoke at the same time in favor of a strong dollar—U.S. regulation since the 1990s.

“Longer term, the strength of the dollar is a reflection of the intrepidity of the U.S. economy and the fact that it is and will continue to be the primary currency in regards of the reserve currency,” Mnuchin was quoted as saying.

But the market chose to converge on the comment about weakness, possibly because the Davos gathering is visioned as a bastion of globalization and free trade. Later, Ross attempted to exchange the narrative in an interview on CNBC, when he took issue with the definition that the U.S. is in a policy shift, but the dollar continued to weaken.

The White Abode, however, did not say much to clarify the situation, saying only that it believes in a at liberty trading currency and that the dollar is stable.

Mnuchin’s comments, if they do specify a shift, depart from the policy of the past three presidential managements and Treasury secretaries, going back to Robert Rubin. Prior to Trump, presidents in late-model history have refrained from talking the currency up or down.

The dollar wrecked 0.8 percent against the euro, which reached 1.24 in U.S. swop, and 1 percent against the yen.

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