Yellen to Announce No Intervention for Weak Dollar... 'Market Decides' Principle Maintained

Public Disclosure of Monetary Policy Stance Expected at Hearing on the 19th

Janet Yellen, Nominee for U.S. Secretary of the Treasury
Photo by Reuters Yonhap News

[Asia Economy Reporter Jeong Hyunjin] Janet Yellen, the former chair of the Federal Reserve (Fed) and nominee for the first Treasury Secretary of the incoming U.S. administration under Joe Biden, is expected to clearly state that she will "not pursue a weak dollar," the Wall Street Journal (WSJ) reported on the 17th (local time).

According to WSJ, citing sources close to the Biden transition team, Yellen plans to make this statement during the congressional hearing scheduled for the 19th of this month. This reaffirms that exchange rates are determined by the market rather than by artificial government intervention.

Sources say that when questioned about the next administration's dollar policy, Yellen is expected to say, "The value of the U.S. dollar and other currencies should be determined by the market," emphasizing that the market adjusts to reflect various economic factors. WSJ noted that Yellen aims to demonstrate the U.S. monetary policy of not intervening in the dollar's value over the past 20 years with more precise terminology, adding that since the U.S. declared in 1995 that it would not interfere with the dollar, it has intervened in the currency market only three times?in 1998, 2000, and 2011.

Yellen is also expected to emphasize that deliberately manipulating exchange rates to gain unfair advantages in trade should not be tolerated. Sources reported that Yellen has prepared a response stating, "The United States does not pursue a weak dollar to gain competitive advantages and opposes other countries attempting such actions."

This stance contrasts with the previous Donald Trump administration. President Trump publicly mentioned that a weak dollar was necessary for U.S. companies to gain a competitive edge in trade. Treasury Secretary Steven Mnuchin also shook the currency markets by suggesting in 2018 that a weaker dollar could benefit U.S. trade.