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INFLATION RISKS MAY KEEP TRUMP FROM TRYING TO DEVALUE U.S. DOLLAR
U.S. President Donald Trump’s new term has launched speculation on whether he will act to weaken the U.S. currency as he seeks to rebalance trade relationships and potentially raise tariffs on countries including China.
Brad Bechtel, global head of FX at Jefferies, says this is unlikely, as it would risk bringing higher inflation.
“I don't really see him doing anything that's going to proactively try to weaken the dollar,” Bechtel said. “A weaker dollar would obviously ignite inflation pressure here in the States and he was elected on an inflation mandate.”
Intervention from other nations to shore up their currencies, meanwhile, could become more common as they grapple with a stronger dollar.
Indonesia’s chief economic minister said on Tuesday it will require natural resource exporters to hold all proceeds onshore for at least one year, a move that could boost the country's foreign exchange reserves by $90 billion a year and support the local currency.
“You'll see more protectionist type measures like that, or other ways to try to diversify their holdings in an effort to protect their currencies and try to prevent any sort of runaway issues there,” said Bechtel.
(Karen Brettell)
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