ROI-Is the dollar policy 'mini Mar-a-Lagos' or Whac-A-Mole?: Mike Dolan

## MINI ACCORDS OR RUNAWAY TRAIN? So progress on deflating the dollar may well be mounting against the yuan, won, yen and Taiwan dollar TWD=, currencies that together make up just over 20% of the [dollar's trade-weighted basket](https://www.federalreserve.gov/releases/h10/weights/default.htm). While eye-catching, that collective weighting is only on par with that of the euro EUR=. While euro/dollar has done little for the past 12 months, it remains up 11% since Trump returned. It's a similar picture for Britain's pound GBP= and Switzerland's franc CHF=, and together those three European currencies make up some 30% of the dollar's basket. Weighting-wise, the two other big elephants in the room are the North American duo of Mexico and Canada, which make up a whopping 28% of the dollar index. Mexico's peso MXN= is up almost 20% over Trump's term so far and is still rising, while Canada's loonie CAD= is up a more modest 3%. So, is there something of a loose grand plan emerging? Currency manager Stephen Jen at Eurizon SLJ recently noted the sheer difficulty in engineering a weaker dollar overall, certainly without undermining the gigantic foreign holdings of U.S. stocks and bonds. He suggested a more piecemeal route may have been chosen to achieve the overall result. "One way to do this is to engineer several small “Mar-a-Lago Accords” that chip away at the value of the dollar without imparting a general expectation of future dollar weakness," Jen wrote, nodding to former Trump adviser and Fed policymaker Stephen Miran's idea of some multilateral bargain on U.S. imbalances that was dubbed after Trump's Florida estate. "By stringing together a series of “mini-lurches” that surprise the market, the U.S. could deflate the value of the dollar over time without creating expectations of further depreciation." Too conspiratorial? Other currency market experts are less confident that the administration can keep all the moving parts on side while delivering a weaker buck, not least if U.S. growth and inflation reheat and the Fed is forced to tighten interest rates. A U.S. rate rise next week would be a major challenge to the whole picture. However, Societe Generale's Kit Juckes points out that all the actions of the Trump team — from leaning on the Fed to outright currency interventions or bond yield capping — "consistently hint at a desire for a weaker dollar." With all that pressure in one direction, he added, the big problem may well end up being how to stop it — or at least limit the exit of overseas capital that may go with it. "Instead of the rest of the world’s excess savings knocking each other over in their rush to get to the U.S., Uncle Sam will have to work harder to get them to come at all," Juckes added. The 3% annual "bonus" foreign investors reaped on U.S. stock and bond holdings for 14 years flattered that preference in the first place. A potential annual 3% haircut over the horizon would be a very different prospect indeed. For context, the dollar's nominal trade-weighted index against the currencies of its main trading partners rose almost 50% between 2011 and Trump's second inauguration last year — fueled mainly by overwhelming overseas investment flows to U.S. stocks and bonds while U.S. trade and investment deficits yawned. That meant an average annual gain of almost 3% over 14 years and a significant boon to foreign portfolios chasing anything from Wall Street tech stocks to Treasuries. The index has retreated about 8% since and is now near its lowest levels in over three years — limited relief, given the enormous disruption to the global trading system and alliances. But that overall index masks numerous, and often unpredictable, exchange-rate stories, as always. Puncturing the dollar has found most success in Asia, where China's offshore yuan CNH= has — contrary to consensus expectations at the time — appreciated almost 10% since the original so-called "Liberation Day" Trump tariffs in April 2025. Dragging back the dollar against Japan's yen or even South Korea's won KRW= has been much less straightforward and has only recently borne fruit — perhaps in part due to bilateral policy pressures, investment pledges and outright intervention. The yen required joint U.S.-Japan action in late July to find a floor and has rebounded more than 6% in the interim as markets await the Bank of Japan's follow-up interest rate rise next week. What happens next is now fascinating, but the dollar/yen exchange rate is essentially unchanged over Trump's second term overall. South Korea's won has been harder to parse, as it continued to plummet with the yen earlier this year despite stratospheric gains for the country's chip-heavy stock markets. However, its rebound since July came with domestic intervention as well as the yen's jump and has accumulated gains of some 15% in just six weeks, marking a net rise of about 6% since January last year. **LONDON, Sept 10 (Reuters) -** U.S. Treasury chief Scott Bessent has helped ignite more than a few of Donald Trump's economic brushfires. Now, as fire fighter, he may finally be making headway on one of the president's signature ideas: deflating an overvalued dollar. A hawkish Federal Reserve may yet frustrate that effort. Ever since [Trump](https://www.reuters.com/topic/person/donald-trump/) returned to the White House some 20 months ago, there has been an assumption that one of the many ways proposed to rebalance U.S. trade and investment and re-industrialize the world's biggest economy would be to knock the dollar .DXY off its lofty perch and recapture competitiveness from the rest of the world. It's never been made quite that explicit in office, but it was abundantly clear on the campaign trail and from the writings of key Trump advisers that years of dollar appreciation were exaggerating distortions in trade and U.S. asset markets and needed to be unwound. How's he doing so far? Well, Bessent has been one of the lead negotiators in many of the bilateral trade deals that followed Trump's original tariff sweep, certainly those in Japan and around Asia. But he's been especially hyperactive of late — not least in coordinating with Tokyo on a joint intervention to boost the yen JPY=, while encouraging similar intervention in South Korea and, in the background, trying to keep a lid on U.S. Treasury yields. Some might argue that all three of those actions, combined with 18 months of [protectionism and bilateral trade](https://www.reuters.com/business/tariffs/) arrangements, are starting to deflate the dollar's exchange rate balloon at last.

ROI-Is the dollar policy 'mini Mar-a-Lagos' or Whac-A-Mole?: Mike Dolan

Mini accords or a runaway train?

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