WASHINGTON (BLOOMBERG) - The US strong dollar mantra apparently won't get drained along with the rest of Washington's swamp.
US Treasury Secretary Steven Mnuchin said a strong dollar signaled confidence in the American economy and that the currency's appreciation over a longer horizon is "a good thing," echoing a policy in place for more than two decades.
In an interview with the Wall Street Journal, he added a caveat that short-term dollar gains can be good or can have "not so positive" effects.
The message is similar to the one Mnuchin delivered to lawmakers at his confirmation hearing in January, when he sought to clarify an earlier suggestion by Donald Trump, just before he took office as president, that he preferred a weaker dollar. Trump's remarks indicated a break from a more than two decades of US support for a strong dollar, a shift that could help his plans to shrink the US trade deficit. A weaker dollar makes imported goods more expensive.
"For longer-term purposes, an appreciation of the dollar is a good thing and I would expect longer term, as you've seen over periods of time, the dollar does appreciate," Mnuchin said, according to the article published on Wednesday (Feb 22).
"In the short term, there are certain aspects (of a strong currency) that are positive about the dollar for our economy and there are certain aspects that are not as positive."
Mnuchin linked gains for the dollar since the election to as a sign of support for Trump, who campaigned on promises to almost double economic growth and unleash fiscal stimulus with tax cuts and infrastructure spending.
Trump's "Drain the Swamp" campaign slogan referred to ridding the capital of self-interested officials and ineffective policies. The Bloomberg Dollar Spot Index has gained 3.3 per cent since the November election.
"A lot of the appreciation of the dollar since the election in particular is a sign of confidence in the Trump administration and the economic outlook for the next four years," Mnuchin said.