The index linked to the greenback gained against seven out of the 10 major currencies on Wednesday and began to trade above the mark of 96 after having declined to the lowest level since February 2022 earlier.
In an interview to CNBC, Bessent highlighted that the US has always had a “strong dollar” policy and that they are “absolutely not” intervening in the Japanese currency markets. There have been speculations since last week that the US may intervene to salvage the Yen, which has seen extreme selling pressure.
“Bessent’s comments soothed investor concerns,” said Erica Camilleri, a senior global macro analyst at Manulife Investment Management, adding that the remarks “helped restore confidence in the administration’s currency policy.”
Speculation though continues to remain on whether or not Japanese officials will step in to rescue the currency, which has also been a contributing factor to the US Dollar’s weakness.
Bessent’s remarks are also in contradiction to US President Donald Trump’s comments on the Dollar fall, when he said that the currency is doing great and it is only fair that it discovers its own value. He also added that weak Dollar will boost the competitiveness of US exports and also bring down its trade deficit.
The US Dollar had its worst year since 2017 amidst unpredictable policy-making from the White House, threats towards Greenland, pressure on the Federal Reserve, and fears that the “sell America” trade could begin to playout if these scenarios continue to persist.
“This may very well be the beginning of the next leg lower in the dollar, and many may not be prepared for it,” said Stephen Jen, founder of Eurizon SLJ Capital, a former Morgan Stanley currency strategist who developed the “dollar smile” theory.
ING believes that Wednesday’s recovery could also be a selling opportunity for investors who are convinced that the decline in the greenback is here to stay.
(With Inputs From Agencies)
