A highly controversial American president seems determined to offend as many people inside and outside the US as possible. Having torn up the economic rules that have bound the world’s biggest economy to its partners in the developed world, he seems to be making up a new set of rules as he goes along.
Committed to winding down the wars launched by his predecessors, he seems in some ways to be extending them. He talks tough on trade, and is hawkish about China, which does not stop him reaching out to Beijing.
As federal deficits climb, the US dollar – anchor of the world currency system – is buffeted, tarnishing its reputation as a safe-haven asset.
Nixon and Trump: yesterday once more?
This last sentence is the clue that we are talking not about Donald Trump, who took office in January 2017, but Richard Nixon, who entered the White House in January 1969.
In his day, Nixon was every bit as controversial as Trump, with detractors unsure as to whether they were simply horrified at what their compatriots had done at the ballot box or whether they suspected that only some sort of skulduggery could explain such an election result.
Like Trump, Nixon saw close aides convicted of assorted crimes, in Nixon’s case mainly connected with the Watergate scandal. Like Trump, Nixon said Europeans should pay more for their own defence. Both men have insisted that rising economic powers should not undervalue their currencies to grab export markets.
But here is the difference. The dollar not only experienced heavy turbulence during the Nixon years (he left office in 1974) but was actually forced to devalue against gold, in August 1971.
Sterling volatile over Brexit
As the Seventies progressed, the dollar lost about a third of its value against major world currencies.
Here, by contrast, is the relatively placid foreign-exchange performance under Trump. The dollar/euro rate on 26 March was €0.8842. On 26 February, it was €0.8781 and three months ago, on 26 December, it stood at €0.8809.
To see any significant movement, you need to go back to 26 March 2018, when it stood at €0.8033. It is a similar story against the yen. Currently at 110.3700 yen, the dollar was trading at 110.575 yen on February 26 and 111.365 yen on 26 December.
On 26 March 2018, it traded at 105.405 yen.
The sterling rate is more volatile, largely because of the UK’s Brexit difficulties. Currently worth £0.7596, the dollar traded at £0.7547 on 26 February, £0.7915 on 26 December and £0.7027 on 26 March last year.
Many factors other than the conduct of the presidency affect the dollar’s value, of course, not least the trade position, the outlook for interest rates and the relative strengths of other currencies. But the evidence so far is that, in contrast to the history of the Nixon years, a controversial incumbent in the White House would not seem to be among the most important of those factors.