Trump wants a "weak dollar" Many major banks say: It's not that easy

According to the Smart Finance app, Wall Street strategists have stated that if Trump is re-elected as President of the United States, it will boost the dollar, despite Trump's recent preference for a weaker dollar. It is reported that one of Trump's most market-focused policies is to promote exports through a "weak dollar" policy. However, achieving a devaluation of the dollar is not as simple as imagined. The low tax and high tariff combination favored by Trump is believed to stimulate inflation and interest rates, increasing the attractiveness of the dollar. In addition, due to its safe-haven status, demand for the dollar also increases during uncertain periods.

A report from Deutsche Bank on Monday stated that making the dollar soft is "very difficult" as it would result in intervention costs of trillions of dollars or policies aimed at encouraging massive capital outflows from the United States. The bank's strategists stated, "Compared to policies that drive the dollar lower, tariffs and their stronger impact on the dollar are more likely to dominate the market."

Barclays stated that other long-term driving factors, such as slowing global economic growth, will continue to support the dollar. Barclays strategists, including Themistoklis Fiotakis, stated in a report, "Even the tariff risk itself is enough to support a rise in the dollar." The bank also advised clients to take advantage of the recent weakness in the dollar to re-enter long positions.

Morgan Stanley strategist James Lord stated that after Trump's recent comments on wanting a weaker dollar, the debate around the outlook for the dollar has intensified in the market. However, he insists that Trump's potential tariff policies will lead to a stronger dollar, especially if retaliatory measures from trading partners pose risks to the global economy. James Lord said, "It is difficult for currency interventions to sustainably change exchange rate trends. We believe that investors generally agree with our view that the dollar may appreciate due to the implementation of trade tariff policies."

Furthermore, although Trump may try to weaken the dollar by curbing the independence of the Federal Reserve, given the dollar's unique status, government checks and balances will make this path extremely challenging. Dario Perkins, Managing Director of TS Lombard, stated, "While undermining the credibility of the Federal Reserve would be a good starting point, any U.S. government faces a more daunting task compared to other national governments in devaluing the dollar. The dollar is the world's reserve currency, creating structural demand for the dollar." It is worth noting that Trump explicitly denied any plans to weaken the independence of the Federal Reserve this week and supported Powell to continue as Chairman.

It is reported that in the past week, the dollar has shown its dominant position as a safe-haven currency. Despite the intertwining of political headlines and tense sentiments before earnings releases, leading to rare simultaneous declines in U.S. stocks, bonds, oil, and gold, the dollar index still recorded its first weekly gain in three weeks and achieved the largest increase since early June. Market momentum also favors the dollar, with investors and asset management companies once again increasing their long positions in the dollar