The weak dollar revolution could be tweeted - Nomura

Analysts at Nomura note that the dollar has had a weak start to 2017.

Key Quotes

“While the recent move has been largely driven by a lower USD/CNH (and perhaps uncertainty surrounding the Fed’s outlook revealed in the December meeting minutes), we think there are more fundamental reasons to be cautious of the dollar.”

“Beneath all his rhetoric over the years, Donald Trump has consistently maintained a protectionist stance. While this may seem a break from recent Republican stances, a longer historical perspective shows that protectionism was traditionally a Republican stance all the way back to the party’s founder, Abraham Lincoln. President Trump has various options to follow a protectionist policy. One is to renegotiate existing trade agreements and switch to bilateral negotiations. A more dramatic path would to be impose import tariffs directly or indirectly (border tax) on other countries.”

“Then there is the possibility of introducing a weak dollar policy. With the dollar at its highest level in real terms in 15 years and a recent sharp worsening in the non-oil US trade balance, there could even be a valuation-based argument for instituting such a policy. The implementation of such a policy would probably not match the Plaza Accord. It could take the form of a tweet, actual FX intervention or even the creation of a sovereign wealth fund. Needless to say, Donald Trump’s position on trade policy should not be ignored.”