U.S. Treasury Secretary Steven Mnuchin’s signal at the World Economic Forum that he preferred a “weaker dollar” has drawn a sharp response from European countries concerned that the U.S. is adopting a more hostile approach toward its trading partners.
“Obviously, a weaker dollar is good for us. It’s good because it has to do with trade and opportunities,” Mnuchin said Wednesday at the forum in Davos, Switzerland.
Mnuchin tried to clarify his remarks Thursday, but European Central Bank President Mario Draghi criticized the “use of language,” saying it could rattle currency markets.
Draghi reiterated a statement issued by the International Monetary Fund in October, saying countries had agreed to “refrain from competitive devaluations and will not target our exchange rates for competitive purposes.”
As Draghi spoke, the euro spiked above $1.25, its highest level in more than three years, but then it declined somewhat a while later.
‘Not a shift’ in view
The dollar fell to nearly three-year lows Wednesday after Mnuchin’s remarks, which he attempted to clarify later by saying he was not advocating a U.S. policy in favor of a strong dollar.
“We are not concerned with where the dollar is in the short term,” Mnuchin told reporters. “It is not a shift in my position on the dollar at all. In the longer term, we fundamentally believe in the strength of the dollar.”
The dollar had already weakened since Tuesday, when U.S. President Donald Trump implemented new protectionist measures against China and South Korea.
His remarks were broadly perceived as a signal that Washington was willing to let the dollar decline to make U.S. exports cheaper.
White House spokeswoman Sarah Huckabee Sanders, when asked Wednesday whether the administration favored a weaker or stronger dollar, tried to ease concern that the administration might be attempting to influence the currency.
“We believe in free-flowing currency. The president has always believed in that,” she said.