Sunday, 21 October, 2018

Trump 'absolutely not' trying to talk down dollar: Mnuchin

Asia stocks dollar under pressure after soft U.S. data A woman walks past electronic boards showing stock prices outside a brokerage in Tokyo
Nellie Chapman | 20 April, 2017, 06:32

In an interview with the Financial Times this week, Mnuchin said that his original prediction that lawmakers would get tax reform to President Trump's desk by August was "highly aggressive to not realistic at this point".

Mr. Mnuchin also confirmed that the controversial border adjustment tax is still on the table but insisted that there are other ways to close budget gaps.

The US Treasury secretary has conceded that the administration's timetable for ambitious tax reforms is set to slip following setbacks in negotiations with Congress over healthcare.

As we noted at the time, Mnuchin first had played down Trump's WSJ comment that the dollar was getting "too strong" in an interview first published late on Monday in the FT.

"SM - Absolutely. And I go back to saying it's a big part of the president's agenda to create economic growth".

"Trump appears to have made a concession regarding China, a key player in the North Korean situation", said Makoto Noji, senior strategist at SMBC Nikko Securities, referring to last week's U.S. Treasury's semiannual currency report in which the Trump administration backed away from a key campaign promise and did not label China a currency manipulator. Moreover, chances of two rate hikes in 2017 dropped below 40%, so traders betting on interest rates differentials should tweak their model assumptions. He added, "As the world's currency, the primary reserve currency, I think that over long periods of time the strength of the dollar is a good thing.... In my mind it's a function of the confidence in the potential of the USA economy and the current state of the U.S. economy, particularly relative to the rest of the world".

The U.S. -Japan economic dialogue will be watched carefully because there are concerns that the USA might take a tough trade stance against Tokyo given that President Trump has alleged that some countries including Japan have artificially weakened their currencies. "We're going to be announcing it very soon", Trump said at Snap-on headquarters in Wisconsin. "They are in the process of being cleared to roll out". "These sanctions programmes are extremely important".

Washington's standoff with Pyongyang was seen adding a new dimension to U.S. -Japan economic talks, as the United States has sought support from China in confronting North Korea. One of the most contentious elements of the Trump plans is the "border adjustment tax" which would apply to U.S. companies importing products, although Mnuchin has indicated that this is still under consideration.