The dollar plummeted to a three-year low, in its biggest one-day drop in 10 months, after Treasury Secretary Steven Mnuchin said a weak dollar is good for the U.S., raising the prospect of a currency war.
Mnuchin made the comment in Davos, Switzerland Wednesday morning to news reporters attending the World Economic Forum. The dollar index, reflecting the dollar's value against a basket of currencies, tumbled 1 percent to about 89.25.
Mnuchin's comments echo statements by President Donald Trump, who famously helped turn a market trend of a stronger dollar last Januarywhen he said, prior to his inauguration, that the dollar was "too strong" and that U.S. companies can't compete because of it, particularly against the Chinese. The dollar index has lost more than 10 percent since then, and after Mnuchin's comment Wednesday morning, it sank to the lowest level since December, 2014.
"Obviously a weaker dollar is good for us as it relates to trade and opportunities," Mnuchin told reporters, according to Bloomberg, adding that the currency's short-term value is "not a concern of ours at all." Mnuchin speaks on a panel in Davos Wednesday morning, at 11 a.m. CET.
"We're objectively looking at the situation, and we're waiting to see what he says. If it is a shift in dollar policy, that would be very significant," said Ben Randol, G-10 foreign exchange strategist at Bank of America Merrill Lynch.