A strong dollar: help or harm?

Strong policies that deliver stronger fundamentals and a stronger currency are very much in the national interest. There can be some short-term advantages to currency depreciation, but the United States is better served by making clear that we intend to pursue strong policies, and in turn that generates a well-functioning international order. There has been a lot of progress with internationalization of the Renminbi, but there are some pretty serious obstacles to its becoming a major reserve currency. Clearly the Chinese Renminbi is playing more of a role in international finance. However, there are foundations for being a major international currency, and right now China does not seem to be moving too quickly to build those. These include capital controls, heavy management of the exchange rate, and financial repression. The phase one managed trade deal with China has targets that are likely unachievable, and continuing protectionist US policies would more likely put upward pressure on the dollar. It would be nice for the US dollar to remain strong because we have really good policy and fundamentals. It seems more likely we're going to remain strong because looking at Europe, Japan, and China, nobody is an impressive competitor.