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Trump Rejected Aggressive Move to Weaken Dollar to Boost Trade

Saleha Mohsin, Shawn Donnan and Katherine Greifeld
(Bloomberg) -- President Donald Trump said he had not ruled out measures to counter the dollar’s strength and noted that while it was a “beautiful thing” to have a strong currency, it makes U.S. exports more expensive.“I didn’t say I’m not going to do something” on the dollar, Trump told reporters Friday in the Oval Office. “The dollar is very strong, the country’s very strong, the dollar -- it’s a beautiful thing in one way, but it makes it harder to compete.”Hours earlier, White House economic adviser Larry Kudlow said on CNBC that the administration had “ruled out any currency intervention” following a meeting with the president and his economic team.Two people familiar with the matter said the meeting was focused on trade. Part of the agenda included a discussion of Trump’s concerns about the impact of a strong dollar, the people said.During the Tuesday meeting -- which the White House didn’t include on Trump’s public schedule -- officials weighed proposals to publicly talk down the dollar’s value or weaken the greenback by intervening in currency markets using Treasury’s $94 billion exchange stabilization fund, the people said. They asked not to be identified discussing the confidential discussions.Navarro PositionThe president has repeatedly raised concerns recently about the value of the dollar relative to trade competitors. He tweeted this month that Europe and China are playing a “big currency manipulation game” and called on the U.S. to “MATCH, or continue being the dummies.”During the meeting, White House trade adviser and China hawk Peter Navarro was among the officials advocating for a currency intervention, the people said, while Kudlow and Treasury Secretary Steven Mnuchin opposed the idea.But one person familiar with the meeting said Trump hasn’t made a firm decision not to intervene in currency markets at some point and that the option remains under discussion, a point that Trump’s subsequent comments in the Oval Office appear to corroborate.The White House has held multiple meetings about the strength of the U.S. dollar and how to address it, several people familiar with the matter have said.‘Dependable Dollar’“Just in the past week we had a meeting with the president and the economic principals, and we have ruled out any currency intervention,” Kudlow told CNBC in an interview on Friday. “The steady, reliable, dependable dollar is attracting money from all over the world.”The Bloomberg dollar index extended its gains after Kudlow’s remarks, touching a one-month high.Kudlow said Trump is concerned that other countries may be manipulating their currencies lower to try to gain short-term trade advantage.“That, we do not like,” he said. “But it’s not a question about bringing down the dollar.”Wall Street has produced a stream of analysis recently on the prospects of intervention, in which the White House instructs the Treasury to sell dollars to drive the greenback’s price down. Historically, the Federal Reserve has partnered with the Treasury in interventions, though it has policy independence and isn’t obliged to join in.Related story: Wall Street FX watchers unconvinced by Kudlow assurancesMnuchin has called a strong dollar good for the U.S. economy in the long term and said he wouldn’t advocate for a weak-dollar policy in the near future.“I do believe in a strong dollar, which signifies a strong U.S. economy, a strong stock market and particularly because of the president’s economic policies, we have growth in the U.S. that has outpaced everywhere else,” Mnuchin said earlier this week.\--With assistance from Shawn Donnan.To contact the reporters on this story: Saleha Mohsin in Washington at smohsin2@bloomberg.net;Josh Wingrove in Washington at jwingrove4@bloomberg.net;Katherine Greifeld in New York at kgreifeld@bloomberg.netTo contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Alister Bull, Scott LanmanFor more articles like this, please visit us at bloomberg.com©2019 Bloomberg L.P.

(Bloomberg) -- President Donald Trump has rejected, for now, the idea of aggressive currency intervention that could give the U.S. an edge with its trading partners by weakening the dollar, according to two people familiar with the matter.

The decision came earlier this week at a White House meeting focused on trade. Part of the agenda included a discussion of Trump’s concerns about the impact of a strong dollar, the people said.

During the Tuesday meeting -- which the White House didn’t include on Trump’s public schedule -- officials weighed proposals to publicly talk down the dollar’s value or weaken the greenback by intervening in currency markets using Treasury’s $94 billion exchange stabilization fund, the people said. They asked not to be identified discussing the confidential discussions.

The internal debate was revealed on Friday by Trump’s top economic adviser, Larry Kudlow, who told CNBC that the administration had “ruled out” a currency intervention. He rejected the assertion that Trump wanted to weaken the U.S. dollar.

Navarro v. Mnuchin, Kudlow

The president, though, has repeatedly raised concerns recently about the value of the dollar relative to trade competitors. He tweeted this month that Europe and China are playing a “big currency manipulation game” and called on the U.S. to “MATCH, or continue being the dummies.”

During the meeting, White House trade adviser and China hawk Peter Navarro was among the officials advocating for a currency intervention, the people said, while Kudlow and Treasury Secretary Steven Mnuchin opposed the idea.

But one person familiar with the meeting said Trump hasn’t made a firm decision not to intervene in currency markets at some point and that the option remains under discussion.

The White House has held multiple meetings about the strength of the U.S. dollar and how to address it, several people familiar with the matter have said.

‘Dependable Dollar’

“Just in the past week we had a meeting with the president and the economic principals, and we have ruled out any currency intervention,” Kudlow told CNBC in an interview on Friday. “The steady, reliable, dependable dollar is attracting money from all over the world.”

The Bloomberg dollar index extended its gains after Kudlow’s remarks, touching a one-month high.

Kudlow said Trump is concerned that foreign countries may be manipulating their currencies lower to try to gain short-term trade advantage.

“That, we do not like,” he said. “But it’s not a question about bringing down the dollar.”

Wall Street has produced a stream of analysis recently on the prospects of intervention, in which the White House instructs Treasury to sell dollars to drive the greenback’s price down. Historically, the Federal Reserve has partnered with Treasury in interventions, though it has policy independence and isn’t obliged to join in.

“If the White House rules it out, it is important,” Jens Nordvig, the founder of research firm Exante Data LLC, said Friday. “What is a bit unclear is if Trump is fully behind this, and for how long. I would certainly not rule it out; it would be different if Trump said it clearly himself.”

Related story: Wall Street FX watchers unconvinced by Kudlow assurances

Mnuchin has called a strong dollar is good for the U.S. economy in the long term and said he wouldn’t advocate for a weak-dollar policy in the near future.

“I do believe in a strong dollar, which signifies a strong U.S. economy, a strong stock market and particularly because of the president’s economic policies, we have growth in the U.S. that has outpaced everywhere else,” Mnuchin said earlier this week.

“There have been doubts about the administration’s stance on the strong dollar policy and FX intervention,” said Richard Franulovich, head of foreign-exchange strategy for Westpac Banking Corp. in New York. “Encouragingly, Kudlow is pushing back against the idea of intervention.”

Read more: White House Knows It Needs the Fed to Make a Dent in the Dollar

(Updates with details on Trump meeting from first paragraph.)

--With assistance from Vivien Lou Chen.

To contact the reporters on this story: Saleha Mohsin in Washington at smohsin2@bloomberg.net;Shawn Donnan in Washington at sdonnan@bloomberg.net;Katherine Greifeld in New York at kgreifeld@bloomberg.net

To contact the editors responsible for this story: Margaret Collins at mcollins45@bloomberg.net, Alex Wayne, Ros Krasny

For more articles like this, please visit us at bloomberg.com

©2019 Bloomberg L.P.