The pound swung wildly against the dollar yesterday after Donald Trump warned the greenback was ‘too strong’.
In almost unprecedented comments that sent shockwaves through financial markets, the US President said he would prefer his currency to be weaker – while claiming its strength was based on his leadership abilities.
His words sent the greenback plummeting 0.7 per cent against the pound, which hit a monthly high of $1.2574 before later losing that ground. By 5pm sterling was down 0.2 per cent at $1.2516.
‘My fault’: Donald Trump warned the dollar was ‘too strong’ and said he would prefer his currency to be weaker
‘I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me,’ Trump said in an interview.
‘But that’s hurting – that will hurt ultimately. Look, there’s some very good things about a strong dollar, but usually speaking the best thing about it is that it sounds good.
‘It’s very, very hard to compete when you have a strong dollar and other countries are devaluing their currency.’
The pound fared better against the euro, rallying to a six-week high as traders’ thoughts turned to the French presidential elections and the nightmare risk of a Eurozone break-up should far-right candidate Marine Le Pen unexpectedly triumph.
It ended up 0.15 per cent to €1.1771.
But Trump’s comments were the main market mover on the day, marking a dramatic split with protocol which means most leaders never talk about currency markets.
It follows comments in January, when he said the dollar was ‘killing us’ by driving manufacturers abroad, where labour was cheaper.
Shortly after his election, the President allegedly called national security adviser Mike Flynn at 3am to ask if a stronger or weaker currency was better for the economy.
Flynn is said to have replied that it wasn’t his area of expertise. As well as railing against the dollar’s strength, Trump also used his Wall Street Journal interview to U-turn on a host of issues, including the reappointment of Janet Yellen as head of the Federal Reserve.
Trump previously said Yellen ‘should be ashamed of herself’ and attacked her for keeping interest rates artificially low for political reasons.
But yesterday he announced that she was ‘not toast’ when her term of office ends in January and refused to rule out backing an extension to her time in charge.
‘I like her, I respect her,’ Trump said. ‘It’s very early.’
He also abandoned plans to brand China a currency manipulator which was keeping the renminbi artificially low to boost trade – something he once pledged to do on his first day in office.
Market watchers were stunned by Trump’s words, seeing them as fresh evidence of his unpredictable attitude.
Chris Beauchamp of IG said this uncertainty had sent some investors running for the hills, with their cash moved to less risky assets such as gold and the Japanese yen.
‘First we had the ‘Trump bump’, then the ‘Trump slump’, now we perhaps have a Trump volte-face?’ he said.
‘It looks like someone in Washington has laid out the facts for the President.
‘It is, of course, folly to try to work out policy from the President’s statements, but the shift to safe havens goes on.’