The summer of 2018 is coming to an end, and at last the autumn campaign begins [Jiro Ota]
Ito Jiro's Profile
Jiro Ota. FX strategist. He began FX trading in 1979 at The First National Bank of Boston Tokyo Branch. Later he worked in corporate FX trading at Manufacturers Hanover Trust Bank, BHF Bank, National Westminster Bank, and ING Bank, then moved into retail FX, worked in sales at GFT Tokyo, later gaining experience as a market strategist, and is now active as a private investor.
*This article is a reprint/re-edited version of an article from FX攻略.com, November 2018 issue. Please note that the market information written in the body may differ from the current market.
The future dollar market will dance on President Trump's palm
Recently, President Trump has been making more statements about the dollar. On August 16, the President said, "Money is flowing into the important dollar," NEC Chairman Kudlow said the dollar is strong and stable and "praising the dollar’s strength," but from August 20 onwards there have been more statements implying a defense of a weaker dollar, and the foreign exchange market has been fluctuating in response to Trump's remarks (as of August 23, 2018).
In the United States, in order to maintain the independence of the Federal Reserve (FRB) in terms of monetary policy, executive influence by the president is limited. However, exchange-rate policy falls under the jurisdiction of the U.S. Treasury, and the FRB has no decisive authority. The U.S. Exchange Stabilization Fund is managed and operated by the Secretary of the Treasury with presidential approval, and the FRB functions only as an agent of the Treasury; this relationship is similar to the Japanese relationship between the Ministry of Finance and the Bank of Japan.
Changes in currency policy have broad effects on financial markets, and whether the president can directly intervene is questionable, but in extreme terms, if President Trump desires a weaker dollar, he could simply order Treasury Secretary Mnuchin. Recently there have been remarks that could be interpreted as aiming toward a weaker dollar. It is well known that a weaker dollar is an effective means of addressing the U.S. trade deficit, but what is President Trump's true intention?
