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Dick Bove: Trump's Weak-Dollar Policy Could Kill Economic Rally

(Christoph Burgstedt/Dreamstime)

By    |   Thursday, 25 January 2018 12:20 PM

Banking analyst Dick Bove reportedly claims the Trump administration's weak-dollar policy threatens to halt the bull-run stock-market rally raging into record territory since the 2016 election.

While the stock market has preferred a weak currency, Bove said it ultimately would drive up borrowing costs, CNBC quoted him as saying.

"Foreigners will not fund U.S. debt if the policy of the United States is to degrade the stability of the dollar," Bove, of the Vertical Group, said in a report. "The United States depends on the dollar being regarded as the world's reserve currency."

"If the dollar were to weaken, the [Chinese] yuan would begin to replace it as the world's reserve currency," Bove said. "Goodbye recovery ... higher taxes, higher interest rates."

A day after sending the dollar reeling with comments supportive of a weak U.S. currency, U.S Treasury Secretary Steven Mnuchin said the Trump administration was not seeking a trade war but would defend its economic interests, Reuters reported.

At a news conference at the World Economic Forum in Davos, Mnuchin played down his comments on Wednesday that a weaker dollar was “good for us as it relates to trade and opportunities”, saying they had been “balanced and consistent”.

The remarks were seen by markets as departing from traditional U.S. currency policy and elicited thinly veiled warnings from European finance ministers, as U.S. President Donald Trump arrived in Davos to promote his “America First” agenda.

However, robust quarterly earnings reports and economic data have helped propel major Wall Street indexes to a strong start this year, with each on track for a fourth week of gains.

According to Thomson Reuters data through Wednesday morning, earnings growth for the benchmark S&P 500 is expected at 12.4 percent. Of the 88 companies in the index that have posted results, 78.4 percent have topped expectations, while 72 percent had done so on average in the previous four quarters.

For his part, the president took to Twitter before he headed to Davos.

"Will soon be heading to Davos, Switzerland, to tell the world how great America is and is doing. Our economy is now booming and with all I am doing, will only get better...Our country is finally WINNING again!" he tweeted.

(Newsmax wire services contributed to this report).

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Dick Bove: Trump’s Weak-Dollar Policy Could Kill Economic Rally
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Thursday, 25 January 2018 12:20 PM
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