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Mnuchin's Weak Dollar Remarks Are Still Causing a Stir at Davos

(Bloomberg) -- Follow our full coverage of Davos 2018 here.

Trump has landed. After talks with U.K. Prime Minister Theresa May and Israeli Premier Benjamin Netanyahu, the U.S. president is scheduled to meet with the various executives in attendance at Davos. His message, which he will proclaim in a speech Friday, is that delegates at the World Economic Forum’s annual meeting were wrong to doubt his ability to spur the U.S. economy and stocks.  

Trump is  a “globalist”

Donald Trump is already in the Swiss resort, but his turn on the big stage will be tomorrow. In a widely anticipated speech, he is to “tell the world how great America is” and that “our economy is now booming and with all I am doing, will only get better,” according to his Twitter posts. At the same time he’s likely to argue his “America First” agenda has an international angle and that others should share it. “He wants to shatter the myth that he is only an ‘America First’ president,” said Anthony Scaramucci, the financier who was briefly Trump’s communications director and is still an informal adviser. “That’s not the case. He is a globalist.’’ 

Mnuchin criticized

Treasury Secretary Steven Mnuchin argued his dollar-weakening comments Wednesday were “consistent” with the U.S.’s long-standing exchange rate policy, and that he isn’t concerned by short-term fluctuations in the greenback. “There are benefits of where the dollar is and there are costs of where the dollar is,” Mnuchin said during a panel discussion Thursday. His earlier suggestion that a weaker currency was welcome because it would boost trade was given short-shrift by policy makers. International Monetary Fund Managing Director Christine Lagarde called on him to clarify his remarks, adding that it wasn’t the time for a currency war. “The dollar is of all currencies a floating currency and one where value is determined by markets and geared by the fundamentals of U.S. policy,” Lagarde said in an interview. In Frankfurt, European Central Bank President Mario Draghi suggested recent foreign exchange moves weren’t driven by the economy but are a consequence of public statements. This, he said, would not be in line with the G-20 commitment to “refrain from competitive devaluations.”

Deal Mania

Davos Man is still dancing with Deutsche Bank AG and JPMorgan Chase & Co., betting on surges in deal-making and public offerings this year. “The dialogue on going public globally in 2018 is on steroids right now,” said Mark Hantho, global head of capital markets at Deutsche Bank. As for deals, JPMorgan’s investment-bank head Daniel Pinto said a boom will continue as companies use cheap funds to chase growth via acquisitions. “There is an inclination for chief executive officers to want to do more acquisitions since capital is available at a very attractive rate,” Pinto said. Meantime, BlackRock Inc. CEO Laurence Fink urged investors to stop keeping money in cash as stock markets reach new highs. “We don’t talk about the pool of money that is still sitting here,” Fink said. “Our financial markets are up three times since the financial crisis.”

Brexit positioning

Theresa May isn’t ruling out paying for access to the European single market after Brexit. In an interview Thursday, May said she was “very clear that we want to develop a deep and special partnership, a comprehensive trade agreement.” She pointedly noted “we recognize the importance of the financial services and we want to ensure that we can continue to see those financial services, ensuring the City of London retains its role as a global financial center.’’ Speaking elsewhere in Davos, Chancellor of Exchequer Philip Hammond said Britain “should be confident of reaching something much more ambitious than any free trade agreement that has ever been achieved.’’ Irish Prime Minister Leo Varadkar held out hope that Britain may end up with a “Norway plus” relationship. Interestingly, Barclays Plc CEO Jes Staly has told May to be prepared to sacrifice access to the market if that means gaining control of the rules which govern finance, people with knowledge of the exchange said. 

Crypto concern

Cryptocurrencies are proving to be a big deal in Davos. But May warned that the risk of criminal manipulation means Britain and other governments should be looking at them “very seriously.’’ The IMF is aware there will be innovations but believes crypto-anonymity and its use to conceal illicit trades such as terror financing and money laundering is “unacceptable,” Lagarde said during a discussion panel. Meantime, BBVA CEO Carlos Torres said in an interview that Bitcoin is highly risky and investors should only buy it with “money that you can afford to lose.”

To contact the author of this story: Simon Kennedy in London at skennedy4@bloomberg.net.

To contact the editor responsible for this story: David Rovella at drovella@bloomberg.net.

©2018 Bloomberg L.P.

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