Suddenly everything is talking about currencies. The US Treasury Secretary Steven Mnuchin kicked off the discussions by departing from traditional US policy and saying that a weak dollar is good for the US. His words sent the already falling dollar lower.
He tried to smooth his wording but also said that President Trump shares his views. So far, the dollar enjoyed a correction of sorts but remains on the back foot.
Mnuchin is not the only minister of finance to talk about currencies:
- UK Chancellor of the Exchequer said that the recent ascent of the pound puts it “in a sweet spot” against both the dollar and the euro. He added that a stronger Sterling helps alleviate inflationary pressures.
- French finance minister Bruno Le Maire aspires to “currency levels that reflect economic fundamentals”. His talk about exchange rates joins the chorus.
- IMF MD Christine Lagarde also reacted to Mnuchin’s comments and said that the IMF assessed that the dollar should rise because of the tax cuts. It seems she is frustrated by the failure of her institution’s forecasts.
We can also expect ECB President Mario Draghi to complain about the higher euro in his press conference that is coming soon.
Cryptos calmed down by regulators
We are seeing higher volatility in currencies and a lot of talk from high-ranking officials about exchange rates. This wasn’t the situation not that long ago. Volatility in currency markets has been quite poor in 2017 and triggered a lot of frustration.
In addition, we have seen mad moves in cryptocurrencies. Bitcoin’s occasional 20% moves up or down, followed by Ripple and other coins, clearly overshadowed the minuscule moves in currencies.
Sure, traders in forex use significant leverage while there is no real need for leverage when trading altcoins, but the differences were stark.
And now the tables have turned: the tumble of the dollar is quite quick, at least in relative terms. And what about cryptos? After the recent falls, things are relatively stable on cryptos. Regulators in China and South Korea have been acting against trading mining and trading of digital coins.
Bitcoin suffers from its own power usage and from real power
Will we see cryptocurrency volatility erupt again? Will we see forex trading grind to a halt once again? Sure, anything can happen.
Yet for the time being, trading in regular currencies is growing more interesting while virtual ones are not going anywhere fast.