Dollar rallies after Trump says it will get ‘stronger and stronger’

The dollar reversed its losses and went positive Thursday, after President Donald Trump said the greenback will strengthen because of the growing U.S. economy and that his Treasury secretary’s comments favoring a weak dollar were taken out of context.

Trump commented Thursday, in an interview with CNBC, after the dollar declined about 2 percent in two days to a three-year low. It began to fall sharply after Treasury Secretary Steven Mnuchin said a weak dollar is positive for trade in remarks at the World Economic Forum Wednesday.

Mnuchin attempted to clarify his remarks Thursday, but the currency market continued to react to Mnuchin’s comments as though he was veering away from the dollar policy that’s been in place since the 1990s.

“I think they were taken out of context, cause I read his exact statement and I’ll tell you where I stand, which ultimately is very important,” Trump said in the interview witih CNBC. “No. 1 I don’t like talking about it because frankly nobody should be talking about it. It should be what it is, it should also be based on the strength of the country – we are doing so well. Our country is becoming so economically strong again and strong in other ways too, by the way that the dollar is going to get stronger and stronger and ultimately I want to see a strong dollar.”

The full interview will air on ‘Squawk Box’ Friday at 6 a.m. ET.

The dollar index had been down more than a half percent Thursday, but erased those losses after Trump’s comments aired on CNBC. It was at 89.29, higher by 0.1 percent on the day.

Trump’s comment on the dollar was unusual in that presidents do not usually talk about the currency, but Trump was also unusual in that he spoke about dollar weakness last year, just several days before he was inaugurated. Strategists credit that remark with helping to turn the dollar into a weakening trend, and the dollar index has lost 11.3 percent over the past year.

“He’s trying to tow the line. It looked like Trump was trying to walk back Mnuchin and reiterate a strong dollar policy. It remains to be seen if the actions back the words. It was a pretty clear endorsement of a strong dollar policy,” said Tony Crescenzi, senior portfolio manager at Pimco. “If he said anything to oppose the dollar policy, its weakness would have intensified.”