Analyst: Trump Policy Could Weaken Dollar's Cyclical Support

On August 21st, Jill Hirzel from Insight Investment declared in a report that the US dollar might weaken. This is because Trump's policies have diminished the allure of US exceptionalism and could result in a reduction of capital inflows into the US. Hirzel said, "Policy uncertainty and a more assertive 'America First' agenda may eat away at the cyclical support for the US dollar, causing it to enter a prolonged period of weakness." Nevertheless, she also noted that investors should be cautious when overly betting on the dollar's decline through short positions. This is because growth outside the US is expected to be at best lackluster, and speculators may already have significant short positions on the dollar. Additionally, before there are signs of economic weakness that are sufficient to worry policymakers, real interest rates adjusted for inflation may still remain high. (FXStreet)