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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


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