Wed Oct 16 21:42:53 UTC 2024: ## Trump’s Dollar Weakening Plan Faces Obstacles, JPMorgan Says
**New York** – A second Trump administration’s potential efforts to weaken the dollar could face significant hurdles due to an independent Federal Reserve and a lack of international cooperation, according to JPMorgan Chase & Co.
While both Donald Trump and his running mate, Ohio Senator JD Vance, have publicly voiced their desire for a cheaper dollar, experts believe such a move could be difficult to achieve.
JPMorgan’s chief US economist, Michael Feroli, points out that Trump’s wish to depreciate the dollar contradicts his trade policy preferences, as theory suggests that a tariff-imposing country’s currency should appreciate following higher import duties.
Despite this complication, Feroli acknowledges that the Trump administration might still consider pursuing policies to weaken the dollar. However, he highlights that economists generally question the effectiveness and even the harmlessness of unilateral interventions aimed at weakening the dollar.
While the president has independent tools like the Exchange Stabilization Fund to influence exchange rates, the cooperation of the Federal Reserve, led by Jerome Powell, remains ambiguous.
JPMorgan’s analysis of past interventions suggests that sterilized interventions, which don’t change an economy’s underlying monetary base, have had mixed results. Successful efforts typically involved public announcements, apparent support from monetary authorities, and coordination with other global central banks.
This creates complications for weakening the dollar against major currencies like the euro and yen, as these currencies are often managed by their respective governments. Conversely, intervention against currencies like Malaysia’s ringgit or Singapore’s dollar, which are arguably directed by their governments, might be more successful.
China poses an additional challenge. The country’s onshore and offshore currency regime complicates attempts to depreciate the dollar against the yuan. Any US intervention would need to be undertaken in the offshore CNH market due to China’s capital controls, making it a complex and potentially ineffective endeavor.
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