Although in office less than a fortnight, the new US Administration is showing a disregard not only for the domestic convention but international agreements like on refugees and its talk about the dollar. Some observers had argued that the conduct of monetary policy was tantamount to currency manipulation, but the G7 and G20 offered a more nuanced understanding. 

Manipulation itself was not frowned upon because it violated the sanctity of the markets as some moralists want to argue. Rather manipulating domestic interest rates was accepted. It is not a zero sum game. Currency manipulation to boost exports is a zero sum undertaking and is thought best to avoid.  

Over the last couple of weeks, several Administration officials have talked about the dollar. Some of these remarks were in the confirmation hearings and needed to be kept in that context. However, others seem to have gone out of their way to comment. Trump himself warned a few days before the inauguration about too strong of a dollar.   

Today, the head of Trump’s new National Trade Council, Peter Navarro, told the Financial Times that the euro was “grossly undervalued.” He warned that euro was like an “implicit German mark” and its low valuation gave German an advantage over its trading partners. Navarro said Germany was one of the main obstacles to a trade deal with the EU. He confirmed what has been suspected: TTIP, the Transatlantic Trade and Investment Partnership negotiations, will not be going forward under Trump.  

On balance, many of the comments from Trump officials have expressed concern about the strength of the dollar or, as Navarro, complained about other currencies being undervalued. The OECD confirms.Its models see the euro at nearly 25% undervalued, sterling almost 16.5% undervalued and the yen 11% under-valued. The Mexican peso, whose marked depreciation has been exacerbated by comments by Trump, is undervalued, according to the OECD, by 147%.