Dollar kept quiet under Trump

The dollar has been remarkably inconspicuous during Donald Trump's reign. The exchange rate fluctuations were a lot smaller than during the previous presidents.

Much of the world breathed a sigh of relief as Donald Trump left the White House on Wednesday morning. Of course, it's quite possible that some news editors and comedians will see him go with some regret. After all, he always caused a stir and was a grateful target of parody and skits.

In a sense, his departure is also a loss for the currency world. Under Trump, the dollar was relatively stable. Against the euro, for example, the currency has fluctuated between $1,05 and $1,25. That bandwidth of 20 cents is dwarfed by the price shocks that occurred during the reigns of its predecessors.

When was the dollar the wildest? Under Barack Obama (2008-2016), the difference between the highest and lowest dollar rates was more than double at $0,47. That was even $0,68 under George W. Bush (2000–2008). In this respect, Ronald Reagan (1980-1988) takes the cake. In the first five years of his reign, the dollar has doubled in value against the Deutschmark, which is considered the forerunner of the euro. Admittedly, each of these presidents served two terms. Trump only stayed in power for a four-year term. But even during George HW Bush's only term (4-1988), the price returns were greater than under Trump.

War, attacks and crisis

In one of his last tweets as president, Trump himself made a statement. He said he was proud not to have started a new war as the first American leader in decades. While that claim can be taken with a grain of salt, as usual, Trump does have a point. During his reign there were no specific shocks such as the credit crunch in 2008, the terrorist attacks of 2001 or the Iraqi invasion of Kuwait in 1990. The Covid-19 pandemic was, of course, quite a surprise. But thanks to quick and decisive action by governments and central banks, the economic blow will hit much less hard than was feared for a while.

Trump can thank Biden

A more important reason for the currency calm, however, is that monetary policy in many countries and regions has increasingly aligned with that in the United States. In most developed economies, interest rates have approached zero. Incidentally, when Trump took office, he mainly wanted to push the dollar down, in order to strengthen the American competitive position. Initially, this only worked against the Chinese renminbi. The dollar has lost ground against the euro in recent months. But that decline was mainly caused by the prospect that Biden will soon pull out of his wallet. So it is highly questionable whether dollar weakness made it a little easier for Trump to close the door of the White House behind him.

Joost Derks

Joost Derks is a currency specialist at iBanFirst. He has over twenty years of experience in the currency world. This column reflects his personal opinion and is not intended as professional (investment) advice.

© DCA Market Intelligence. This market information is subject to copyright. It is not permitted to reproduce, distribute, disseminate or make the content available to third parties for compensation, in any form, without the express written permission of DCA Market Intelligence.