Treasury Secretary Dismisses Dollar Decline Concerns, Warns of Euro Strength

The United States Treasury Secretary has dismissed concerns that the recent decline in the dollar's value poses a threat to its status as the world's primary reserve currency. The official emphasized that the core of the "strong dollar policy" is to ensure the long-term reserve currency status of the dollar, rather than short-term exchange rate fluctuations. The Treasury Secretary stated that the recent depreciation of the dollar is a result of the Federal Reserve's monetary policy, and that the dollar's status as the world's primary reserve currency is not threatened by short-term exchange rate fluctuations. The Treasury Secretary also warned that if the euro rises to 1.2 against the dollar, it would cause Europe to "scream."

This warning comes as the euro has been strengthening against the dollar in recent months, and some analysts have suggested that a rise to 1.2 could have significant economic implications for Europe. The Treasury Secretary's comments highlight the importance of the dollar's reserve currency status to the United States, and the potential risks that could arise from a significant depreciation of the dollar. The Treasury Secretary's warning about the euro also underscores the interconnectedness of the global economy, and the potential for currency fluctuations to have far-reaching effects.

The Treasury Secretary's remarks come against the backdrop of the dollar index falling nearly 11% in the first half of the year, marking the worst half-year performance since the Nixon era. Market participants attribute this decline to the trade tariffs imposed by the Trump administration, the persistent pressure on the Federal Reserve to cut interest rates, and the uncertainty caused by the administration's tough stance towards long-term allies. The Treasury Secretary reiterated the core logic of the dollar's reserve currency status, emphasizing that the "strong dollar policy" is about ensuring that the dollar remains the world's reserve currency over the long term, not about short-term exchange rate fluctuations.

The Treasury Secretary pointed out that the Republican tax law is "laying the foundation for economic growth" and that the administration is working to control inflation and make the United States the best destination for global capital. The Treasury Secretary predicted that these measures would continue to support the dollar's long-term status. The Treasury Secretary also noted that predictions of the dollar's demise as a reserve currency since World War II have consistently proven wrong, and that skeptics would once again be proven incorrect. In response to the European Central Bank President's remarks about the "possible moment for the euro," the Treasury Secretary, who has decades of experience in foreign exchange trading in the hedge fund industry, emphasized that if the euro rises to 1.20 dollars, Europeans would "scream" due to its excessive strength.

As of Friday's Asia session, the euro-dollar exchange rate had risen to 1.1760. Historically, the euro's excessive strength has led to public complaints from European Central Bank officials about "brutal" volatility, as currency appreciation directly weakens the price competitiveness of its export products. The Treasury Secretary reminded Europe to "be careful what they wish for" and suggested that, unlike Europe, U.S. policymakers recognize the responsibilities that come with being a reserve currency and can tolerate periods of dollar strength. The Treasury Secretary's comments underscore the importance of the dollar's reserve currency status to the United States and the potential risks that could arise from a significant depreciation of the dollar. The Treasury Secretary's warning about the euro also highlights the interconnectedness of the global economy and the potential for currency fluctuations to have far-reaching effects.