| | | Can the Tail Wag the Dog? | | President Trump disparages China and Europe for "playing big currency manipulation," meaning deliberately weakening their currencies against the U.S. dollar. Trump, meanwhile, wants to weaken the U.S. dollar to shrink the nation's trade deficit and boost gross domestic product. And there is speculation this may happen. Can he do this and will it be effective? | | I don't think so. There are two main ways to force a weaker greenback. | | The first is through central bank intervention. This may work for a currency such as the Chinese yuan as its trading volume is still quite low and Chinese authorities have the ability to restrict speculative movements. But it will not work the same way with the U.S. dollar, the reserve currency of the world. Given a daily turnover in the foreign exchange market of $5 trillion, the U.S. central bank's foreign exchange reserves of merely $127 billion are absolutely no match to counter any free-flowing trading forces in the market. | | Watch the video | | If we can help you with any Foreign Exchange needs, please email foreignexchange@cnb.com or call (800) 447‑4133. | | Want to learn more about international finance, economics, and global events? Sign up for our other Foreign Exchange emails and videos! | | | | | | | Follow City National Bank on social media: | | | | | | Non-deposit investment products: | | • | Are not FDIC insured, | | • | Are not deposits or other obligations of City National Bank and are not guaranteed by City National Bank, and | | • | Are subject to investment risks, including possible loss of the principal invested. | | | | | This report is for general information and education only and was compiled from data and sources believed to be reliable. City National Bank does not warrant that it is accurate or complete. Opinions expressed and estimates or projections given are those of the authors as of the date of the report with no obligation to update or notify of inaccuracy or change. This report is not a recommendation or an offer or solicitation to buy or sell any financial instrument discussed. It is not specific investment advice. Financial instruments discussed may not be suitable for the reader. Readers must make independent investment decisions based on their own investment objectives and financial situations. Prices and financial instruments discussed are subject to change without notice. Instruments denominated in a foreign currency are subject to exchange rate and other risks. City National Bank (and its clients or associated persons) may engage in transactions inconsistent with this report and may buy from or sell to clients or others the financial instruments discussed on a principal basis. Past performance is not an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting. | | | | | | |
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