Opinions differ. While some people are delirious about depreciation of the US dollar, others are greatly disappointed about this fact. ECB President Mario Draghi criticized not only a fall in the greenback exchange rate but also the reasons for this fall. The American currency had a rather sluggish start of the year. It did not produce any sharp swings, but the pressure was almost tangible.
Lately, one of the key drivers of the greenback’s slide has been the comments of Treasury Secretary Steven Mnuchin. Speaking at the World Economic Forum in Davos, he said that the cheap dollar is beneficial for the US economy. In this way he presented the official viewpoint of the White House. After these words the US dollar took a nosedive. It lost over 1% against the basket of majors. ECB President Mario Draghi could not resist an urge to remind the US policymakers about good manners. “The exchange rate has moved in part because of endogenous reasons, namely the improvement in the economy, in part due to exogenous reasons that have to do with communication. And not by the ECB, but by someone else. This someone else’s communication doesn’t comply with the agreed terms of references,” Mr. Draghi said.
Recognizing its mistake, the United States in the person of the President has already said that Mnuchin’s comments were misunderstood, and the US dollar will get stronger. The weak national currency is beneficial for domestic companies as it makes goods produced in the US more commercially viable. On the other hand, it results in a lower demand for the American assets and higher cost of goods and services for the Americans.
