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The US dollar exchange rate has become increasingly politicised. President Donald Trump has called for a weaker exchange rate, a move away from a long-standing and bipartisan rhetorical position favouring a “strong dollar”. At the same time, US Democratic presidential hopeful Elizabeth Warren has called for a managed exchange rate to boost employment and exports, while two members of Congress have sponsored a bill that would tax foreign capital inflows into the United States with a view to balancing its external accounts.
This increased politicisation is partly a symptom of a significant appreciation in the US dollar since President Trump assumed office. As this report will show, this appreciation is not inconsistent with a chaotic trade war and the Federal Reserve cutting interest rates. The US dollar exchange rate often appreciates on increased international political and macroeconomic risk.