Trump’s tariff was expected to strengthen the dollar, but it is not.

The traditional wisdom in Wall Street in November was that the plans for President -elect Donald Trump will strengthen the US dollar. Instead, with a customs tariff, fears of imminent recession may overwhelm any positive benefit for Greenback.

the Ice dollar index It was circulated up to 104.31 on Wednesday, before the Trump tariff was revealed. After this announcement, it decreased and a decrease of 101.27 on Thursday, which is a 3 % swing in about 24 hours. Even with a modest recovery on Friday, the index ended during the week, and the dollar is now weaker than it was before the presidential elections in November.

“The reaction from Trump’s tariff is already a kind of hitting the American economy, and this is not what investors expect,” said Chris Turner, the global market head of Engy. “Investors expected the customs tariff would be optimistic about the dollar and the bad for the rest of the world. But I believe that the American economy was not in a strong situation enough to take these maximum definitions at the present time.”

While Trump may occur in different times positively about both the strong and weak dollar, it is clear that the merchants took his election as support to Greenback. The dollar index He gathered sharply after Trump’s victory On November 5, then continued to climb during the next two months, and traded for a short period of 110 in mid -January.

Since then, the index has been declining amid increasing signs of economic weakness in the United States and as Trump’s trade policies have proven more aggressive than Wall Street, bargaining on it.

Cathy Chrisky, head of ETF ETF alternatives in Invesco, hopes to obtain “short -term pain, long -term gains” from the Economic plan for the Trump administration, but she says market confidence is vibrating.

“The currency reflects the health of the economy, so I think we are very anxious. We somewhat believe that Trump has a plan but we do not know, categorically, what is this plan,” said Chrisky.

A trip to safety

Foreign currencies certainly did not move uniform against the dollar recently.

Traditional currencies as a safe Japanese yen and Swiss franc I saw some of the biggest gains. But the most economical currencies are like Australian dollar Turner said this is closely related to the goods lost against the dollar, especially on Friday, which seemed to be a “more traditional day of risk.”

The journey to safety in other assets has a mechanical effect on the currency market. For example, the decrease in US Treasury revenue makes less attractive to foreign investors to keep US dollars or bonds and collect benefits, while US stock dumping is likely to include foreign investors who turn this allocation into local shares, and sell greenery along the way.

the euro One exception to the risk trade has proven, as it rose against Greenback last week, although it is usually seen as less than a safety play than the dollar. Chrisky said that the increasing optimism about a possible peace agreement in Ukraine and promises of more government spending from countries such as Germany helps to strengthen the euro.

“It was strange that this new administration (Trump) actually helped Europe to get its home in order and to get these currencies to look more attractive,” said Chrisky. Bet on the euro to rise is one of the strategies used in Investco db us dollar index fun (UDN).

What next

Good news for investors is that the sharp step in the currency markets this week does not seem to be an immediate threat to the economy or financial system. Amol Dhargalkar, the administrative partner of Chatham Financial, said that companies may look forward to being more insecure in hedging than the risks of currencies in the coming months, but these companies usually do so in a conservative way, which means that there should not be significant commercial losses from this week.

“Their main goal is not to take a point of view, most often, in the currency. The main goal is to mitigate the risk,” Darjallar said.

While there are hedge boxes that were on the wrong side of the dollar’s move, the foreign exchange market is also a huge and deep liquid and is actively traded around the world, which means that it must be able to withstand 3 % movements in the dollar without a big problem.

Ken Miller, wallet manager, said Simplify the ETF (Foxy) strategy And the president of the company trading. This week was positively compared to the situation that the currency markets faced in the 2008 financial crisis. “This was a completely different animal that banks were in danger and the opposite parties were in danger. I don’t feel it here.”

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