The Republican candidate Donald Trump’s win might prove decisive for the dollar and that is in many ways. Some are too direct and the other are more elusive and indirect. There could be shortages of the dollar in the global financial system, especially outside the United States, if he wins and follow through his campaign promises.
A direct channel is the interest rate differential. Though US Federal Reserve is an independent body, it is not out of the political sphere of influence, especially since policymakers are elected by policymakers in the congress and the senate and by the President. Donald Trump has strongly voiced his support for a hawkish regime at the Federal Reserve and has openly criticized the current actions by the Federal Reserve. Under his regime, Fed Chair Yellen may not enjoy a second term.
The very next channel is little more elusive. Donald Trump has promised to bring down the trade deficit, a major channel for the US dollar getting into the hands of foreign economies that gets dispersed through theglobal financial system.
The third way is the energy way. Mr. Trump has promised to open up the full potential of the vast energy resources available in the United States. If he can steer through that, it would also mean fewer petrodollar getting out of the United States.
We believe, if Donald Trump wins the White House and keeps his campaign promises, the dollar would be fiscally positive,