The art of the depreciation

2 February 2018 By William Pesek

Asia is bracing for a softer greenback. That could curb export-led growth from South Korea to Singapore and prompt a reappraisal of stock valuations. A U.S. policy shift could complicate Japan’s deflation fight and China’s ability to keep growing 6.5 percent annually.

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U.S. President Donald Trump told CNBC on Jan. 25 that “the dollar is going to get stronger and stronger, and ultimately I want to see a strong dollar. Our country is becoming so economically strong again and strong in other ways, too".

The comments came a day after Treasury Secretary Steven Mnuchin sent the dollar to three-year lows by telling journalists at the World Economic Forum in Davos, Switzerland that “a weaker dollar is good for us as it relates to trade and opportunities”.

European Central Bank President Mario Draghi implicitly criticised the apparent change in U.S. policy, saying said an international agreement to avoid targeting exchange rates “has been in place for decades now”.

The U.S. spot dollar index is down about 12 percent since Trump took office in January 2017, partly reflecting much stronger Asian currencies.

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