iBanFirst analysis: What is the risk of the devaluation of the dollar and its impact on Hungarian companies interested in international trade

By: Trademagazin Date: 2024. 07. 31. 11:14

Donald Trump, J.D. Vance, along with his vice presidential candidate, has repeatedly expressed his opposition to the strong US dollar, advocating its devaluation in order to boost US exports and reduce imports, thereby strengthening domestic industry. Despite Trump’s intention to devalue the dollar, the market expects the US dollar to appreciate if Trump returns. This is due to Trump’s economic policies, especially focusing on tariffs, which typically lead to a strengthening of the exchange rate.

Johan Gabriels, iBanFirst’s Southeast European regional director, provides an insight into the predictions of the dollar in the context of the American elections and their impact on Hungarian companies interested in international trade.

Protectionism goes hand in hand with a strong currency

First, studies show that to offset imported inflation, the central bank must raise interest rates. However, this is currently unlikely for the US Federal Reserve (Fed), as it is about to begin its rate-cutting cycle. Second, tariffs lead to a decrease in US import volumes, which reduces the demand for foreign currencies relative to the US dollar, thereby strengthening the former. This mechanism could quickly become operational next year.