Trump fuels currency turbulence and dismay in the markets

The financial markets are experiencing a real storm, triggered by a concerning initiative from the new US President Donald Trump. An unpublished informational document from the new US administration urges leading federal agencies to take targeted actions against currency manipulation by other countries, which could lead to increased volatility in the future. Analysts are speculating about which nations could come under scrutiny. Japan, China, Germany, and Singapore are already on the watch list of the US Treasury Department. These potential measures are causing excitement among currency strategists like Richard Franulovich of Westpac Banking Corp. Trump and the designated Treasury Secretary Scott Bessent could exercise more discretion, which could result in more trading partners being classified as manipulators. In recent times, the US has benefited from high interest rates and robust growth, which have strengthened the dollar and cemented its dominance in the global currency market. Given these circumstances, other countries must prepare for a new round of interventions to support their currencies. China, in particular, which is already in focus due to planned US tariffs, could be especially vulnerable. Any new headlines about currency policies could further harm the yuan. Analysts warn that increased scrutiny by the US could drive countries to allow greater devaluations against the dollar. The concept of a similar past policy, aimed at preventing countries from turning away from the dollar, is being recalled. Discussed measures included export controls and accusations of currency manipulation. Christopher Wong of the Oversea-Chinese Banking Corp. suggests that the "new" fact sheet is likely similar to the existing one, but with a stronger focus on "manipulators." In the end, the conclusion for the markets remains: The winds of change could become stormier if the list of countries under observation grows.