The fiscal policy carried out by Donald Trump worries the markets, and in that framework, some banks begin to point to their clients that the dollar is not acting as a refuge.
Citigroup warned that the dollar I could continue losing ground after the meeting Group of Seven (G-7) This week, as the US moderates its tariff position and advances in agreements with its commercial partners.
In a recent report, Bank’s foreign exchange strategists, led by Osamu Takashimathey pointed out that although Washington is not expected to actively impuls a weak dollar policy, the US currency could be depreciated as commitments are achieved to reduce tariffs within the framework of multilateral negotiations.
Monetary policy conversations have gained prominence on the agenda prior to G-7. Authorities from South Korea and Taiwan admitted having discussed the issue with US officials. Besides, Japan finance minister announced a bilateral meeting this week with the US Treasury SecretaryScott Besent, in which exchange issues will also be addressed.
“We believe that an appreciation of Asian currencies is probable as part of the tariff negotiations,” they said from Citi. “Japan, China and other East Asian economies could be in the center of this debate,” they added, while suggested that Japan Bank’s policy could be discussed behind the scene as part of the bilateral treatments with the US.
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Less tariffs, less impulse for a strong dollar
Since April, the dollar retreated 4%, according to the Bloomberg index of the dollar in cash. The decrease coincided with the imposition of new tariffs by the US, which unleashed strong correction in global markets. Since then, uncertainty about the implementation and duration of these measures has weakened the appetite for assets called dollars.
According to citI, a formal agreement similar to the 1985 Plaza Agreement is not expectedthat deliberately sought to weaken the dollar. On the other hand, the strategists expect Besent to put the focus on the role of central banks in currency behavior, and how international investment policies affect US interest rates.
“We see a greater probability that the dollar will continue to depreciate”bank analysts indicated. “With the reversal of tariffs, the US would have fewer incentives to sustain a strong dollar policy.”
Complex context for the dollar
The recent weakening of dollar occurs in an environment of growing fiscal concern in the USadded to the impact generated by the Trump administration’s commercial policy on market confidence. The qualification reduction to key companies such as Warner Bros. Discovery by S&P – due to the fall of income – has fed doubts about American macroeconomic solidity.
In this context, several financial institutions, such as UBS, have begun to recommend Sell dollars before the growing fiscal risks facing the US economy.
Source: Ambito
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