The U.S. dollar plunged to a three-year low on Wednesday after Treasury Secretary Steven Mnuchin said a weaker dollar was good for U.S. trade in remarks at the World Economic Forum in Davos, Switzerland.
The ICE U.S. Dollar Index, which measures the strength of the dollar against six other currencies, dropped 0.5 percent to 89.66 a day after Mnuchin told business leaders in Davos that a sinking dollar value “is good for us as it related to trade and opportunities.”
“Longer-term, the strength of the dollar is a reflection of the strength of the U.S. economy and the fact that it is and will continue to be the primary currency in terms of the reserve currency,” Mnuchin said Wednesday.
Wednesday’s plunge marked the first time in three years the index has fallen under 90 points.
Mnuchin’s comments echo statements by President Trump in favor of a weaker dollar.
Last January, Trump said that the dollar was “too strong” and that U.S. companies can’t compete because of it, particularly against the Chinese.
US Dollar burns after Mnuchin comments that indicates that Trump admin has abandoned strong Dollar policy. Dollar Index DXY plunges to lowest level since 2014. pic.twitter.com/zVG3KL97Yr
— Holger Zschaepitz (@Schuldensuehner) January 24, 2018
The dollar index has lost more than 10 percent since his remarks.
While the weak dollar could help U.S. exports, strategists point out it devalues all types of U.S. assets, including Treasurys, and makes the cost of goods from overseas more expensive for everyone from manufacturers to everyday Americans.
The Hill adds:
This But some analysts say a weaker dollar could also hurt American consumers by forcing them to pay more for foreign goods.
“The reform momentum of the Trump administration has received another blow,” said strategists at Morgan Stanley last year when the dollar fell to a 10-month low in July.
The euro, meanwhile, saw its value shoot up to a three-year high, trading at $1.2349 Wednesday, up from $1.2298 the day before. The U.K.’s pound also saw a jump in value, trading at $1.4097 on Wednesday, up from $1.4 on Tuesday.