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The fate of dollar rests on the US election - FT
How a Biden or Trump second term as president could affect the currency
The writer is professor of economics and political science at the University of California, Berkeley
The fate of the dollar — like much else — turns on the outcome of this November’s US presidential vote. On this everyone agrees. They just don’t agree on the direction of the turn.
The implications of a victory for Democrats are relatively uncontroversial. The dollar has been strong in recent years because President Joe Biden has championed a strong dose of fiscal stimulus while freeing the Federal Reserve to raise interest rates in response to inflation. This mix of loose fiscal and tight monetary policies has made for a strong currency, as the textbooks predict.
But with the budget deficit already wide and public debt having risen to levels that many Americans find alarming, a re-elected Biden — or a victory for a replacement among the Democrats if he stands down after last week’s debate — would have less fiscal room for manoeuvre. Meanwhile, the Fed would be able to bring down its policy rates as inflation recedes further, as it presumably will. Thus, the policy mix would be less dollar-positive in a second Biden term. This by no means augurs a dollar crisis, but it is a recipe for a somewhat weaker greenback.
https://www.ft.com/content/ba8...
