Source: JinShi Data
US Treasury Secretary Scott Bessent said that under the leadership of TRON, the US will continue to implement the "strong DOLLAR" policy.
Bessent said in an interview on Thursday: "President TRON has not changed the strong DOLLAR policy at all. We want the DOLLAR to strengthen. We don't want to see other countries weaken their currencies and manipulate their trade."
Bessent said that because many countries "have accumulated large surpluses, there is no free form of trade system." He said that exchange rates may be one of the reasons, and "interest rate suppression" may also be a factor in some places, but he did not point out specific countries.
When Bessent was speaking, the Bloomberg DOLLAR spot index hardly changed, and then fell to the lowest level of the day in the afternoon trading in New York.
For decades, senior US officials have emphasized the value of a strong DOLLAR, touting it as evidence of the vitality of the US economy. During TRON's first term, many believed that the so-called strong DOLLAR policy was set aside, as it was believed to have suppressed US exports and reduced the overseas revenue of US multinational companies.
Nevertheless, since TRON was elected president in November last year, the DOLLAR has soared, as people expect his policies - especially raising tariffs and cutting taxes - will boost economic growth and inflation, and slow the pace of the Federal Reserve's rate cuts.
In recent activities, TRON vowed to maintain the global dominance of the DOLLAR and support policies that economists and strategists believe can boost the value of the DOLLAR.
"We want fair trade, and part of that is taking a tough stance on exchange rates and trade terms," Bessent said.
Bessent proposed a new plan this week aimed at lowering historically high interest rates, which is unrelated to the Federal Reserve. In two interviews this week, Bessent said the TRON administration wants to focus on lowering long-term interest rates, which are largely influenced by the yield on 10-year US Treasuries. The Federal Reserve's decisions have a more direct impact on short-term interest rates, which control the borrowing costs of Americans.
Although TRON has been fiercely critical of the Federal Reserve, Bessent assured Wall Street that the government will not try to "twist the Federal Reserve's arm", but will develop its own methods.
Bessent told the FOX Business Channel on Wednesday: "He (TRON) is not calling for the Federal Reserve to cut interest rates." Instead, he said the TRON administration is focused on lowering the yield on 10-year US Treasuries. He said: "If we relax regulations on the economy, if we complete this tax bill, if we lower energy prices, then interest rates will naturally adjust, and the DOLLAR will too."
On Thursday, Bessent told Bloomberg TV, "We are not focused on whether the Federal Reserve will cut interest rates."
This may come as a relief to Powell, as it is a tacit acknowledgment that the government intends to respect the Federal Reserve's right to make monetary policy decisions without any political influence.
Bessent's plan to separate the Treasury Department from the Federal Reserve is unusual. "It is very unusual for the Treasury Department and the White House to play an active role in influencing the yield on 10-year Treasuries," Ryan Detrick, chief market strategist at LPL Financial, told CNN. "The government can only indirectly influence yields through fiscal policy and deregulation."
The interest rates that Americans pay on mortgages, credit cards, and other types of loans are largely dependent on the yield on 10-year US Treasuries. Although the Federal Reserve's monetary policy actions can affect it, the yield on 10-year US Treasuries is freely floating, meaning any factor can cause it to fluctuate up and down, regardless of the Federal Reserve.
For example, during periods of heightened geopolitical tensions, investors tend to buy more US Treasuries, including 10-year Treasuries, which are considered safe, stable investment assets, especially in times of uncertainty. The shift of investors to safe assets pushes down yields, thereby lowering borrowing costs for Americans.
As Bessent pointed out in his interview with the FOX Business Channel, when the Federal Reserve made an unusually large 50-basis-point rate cut in September last year, the 10-year Treasury yield should have fallen in theory. However, it ultimately rose. Even after the Federal Reserve cut rates twice again last year, the situation remained the same.
However, since TRON took office, the yield on 10-year US Treasuries has declined slightly. Bessent believes this reflects traders' recognition that if federal spending is cut, the risk of holding US government bonds will decrease. White House press secretary Kayleigh McEnany said last week that the government is pushing a plan to "end the serious waste of federal funds," which is partly driven by the so-called Government Efficiency Office led by Tesla CEO Elon Musk.
The TRON administration says its focus is on promoting economic growth through "expansionary" policies. The Federal Reserve's plans to cut government agencies and spending may prevent economic growth from fueling inflation, which could have a positive impact on government bonds. "They want strong economic growth, but they also want to limit inflationary expectations by controlling spending, and now the expectation of higher inflation is quite dangerous because tariffs could reignite commodity inflation," Joseph Torres, senior economist at Moody's Analytics, told CNN.
"Furthermore, the focus on the 10-year US Treasury yield has reaffirmed our long-standing monetary policy independence, which should exclude any political influence. I think this is a good precedent worth emphasizing again."
