The US dollar has dropped to a one-month low as markets anticipate the upcoming Group of Seven (G-7) meeting, when foreign exchange (FX) policy will likely be on the agenda. The focus of investors specifically is on whether or not there will be indications that Donald Trump, a prominent figure in US politics, is pushing for a weaker US currency.
The weakness of the dollar follows speculation that the G-7 will discuss exchange rate manipulation or strategic devaluation, particularly with increased global economic rivalry. A weaker US dollar could increase American exports but also provokes concerns regarding possible currency tensions between major economies.
Markets are preparing for any words or policy changes that could come out of the discussions. Financeministers and central bank governors’ comments are being carefully watched by currency traders and analysts alike for suggestions of intervention or coordination.
With economic insecurity continuing, the G-7 talks are being viewed as a gauge of future monetary cooperation — or fragmentation — that could have a major impact on FX markets and global capital flows over the coming months.
