Trump says China, EU "manipulating their currencies" -- and US dollar hit

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"In China their currency is dropping like a rock and our currency is going up, and I have to tell you it puts us at a disadvantage".

All things being equal, rate hikes have the effect of raising a value of a country's currency, because they mean investors can expect higher returns for investing in that country.

In response to the president's tweet, St. Louis Federal Reserve Bank President James Bullard said on Friday that regardless of who comments, the Fed is committed to its two main objectives: keeping inflation low and stable and obtaining maximum employment.

Nor is it the only time the Fed and the White House have clashed. And because we live in a reality where logical human behavior reigns supreme, the president has remained demure on all Fed-related topics this morning... But at the same time I'm letting them do what they feel is best, ' Trump said.

"We have a long tradition here of conducting policy in a particular way, and that way is independent of all political concerns", he said in a radio interview last week with "Marketplace".

Trump has been on a mission to reduce the US$552-billion USA trade deficit and rebuild the nation's manufacturing sector.

"I am not happy about it", Trump said.

The chance inflation might accelerate has increased after the massive tax cut Trump championed a year ago, which has raised the USA debt and budget deficit.

Nixon's attempts to influence provide a flawless example of why defenders of Fed independence are so fervent in their belief that politicians should not attempt to tamper with monetary policy, but there is also empirical evidence for independence as well.

Randall Kroszner, a former Fed governor, said the central bank has withstood political pressure before and will continue to do so under Powell's leadership. However, the criticism doesn't seem to be centered on what he said, but rather on the fact that he called out the Fed. Most notably, during the Bill Clinton administration, Robert Rubin, first as head of the National Economic Council and later as Treasury Secretary, was to refrain from pressuring the Fed on policy, a precedent that has been followed by the administrations of George W. Bush and Barack Obama.

"As usual, not a level playing field", Mr. Trump wrote.

George H.W. Bush's administration complained that he felt the Fed's failure to cut rates more quickly in 1992 contributed to his re-election defeat that year.

But one JPMorgan economists thinks Trump's public desire for lower interest rates could actually backfire. "Now it is taking 15 days or longer". Before the President's comments, the pair hovered around 112.850 but subsequently dropped to 112.115 before staging a rebound as the comments were digested.

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