The Strong Dollar

For decades, the U.S. stood out as the one nation that traditionally preferred its money superpower-strong. Investors flocked to it, enabling the U.S. to borrow lots of money at low interest rates. American consumers feasted on it, buying imported goodies for less. U.S. politicians touted it as evidence of the economy’s eternal dynamism. Then under former President Donald Trump’s “America First” manifesto, the so-called strong-dollar policy was shoved aside, as gains in the currency crimped U.S. exports and hurt the earnings of America’s multinational companies. Janet Yellen, President Joe Biden’s pick for Treasury secretary, signaled that she’d return stability and predictability to the $6.6 trillion-a-day currency market.

At a Jan. 19 confirmation hearing, Yellen didn’t cite the benefits of a weaker dollar, as she did when she was chair of the Federal Reserve. Rather she said that the market should set exchange rates, though she didn’t explicitly refer to the strong-dollar policy. She did assure markets that she would not seek a weaker dollar. Trump and Steven Mnuchin, his Treasury chief, broke with decades of tradition by repeatedly and openly acknowledging that a weaker greenback was good for U.S. trade, though their statements were sometimes conflicting and confusing. A less muscular greenback aligned with Trump’s protectionist trade policies, including a desire for lower trade deficits and increased exports of American goods. In 2019, the Trump team didn’t rule out intervening in currency markets to weaken the greenback, a move that would have violated G-20 commitments.