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Donald Trump: a strong dollar policy in spite of himself


The essential


The dollar is at its highest level since 2003. To what extent will US tax policy support the greenback? This is a crucial question, not only tor the US economy but also for emerging markets that have substantial dollar-denominated debt.

History shows that episodes of US budget stimulus happen when the dollar is strong. However, this is the first time that a budgetary and fiscal stimulus programme is on the table when the economy is close to full employment. Budgetary policy decisions will therefore play a key role in monetary policy this year. In 2017 the dollar is expected to get a boost from one or more particular factors: cycle lag, possible border adjustment tax, lower tax rate on repatriated profits.

Against this backdrop, we should not discount an over-reaction to the upside by the dollar. However, this will almost certainly not last very long. The dollar is already one of the world’s most overvalued currencies (by around 10%), which is a concern for the new administration. And, of course, not all currencies will react in the same way…

CROSS ASSET (Download)

February 2017


Février 2017


The Article


Didier BOROWSKI, Head of Macro Economics
Bastien DRUT & Roberta FORTES, Strategy and Economic Research at Amundi
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Donald Trump: a strong dollar policy in spite of himself
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