U.S. Treasury Secretary: The United States will continue to implement a "strong dollar" policy

U.S. Treasury Secretary Scott Bessent said the United States will continue to implement a "strong dollar" policy under Trump's leadership.

“President Trump has not changed his strong dollar policy at all,” Bessant said in an interview Thursday. “We want a strong dollar. We don’t want to see other countries weaken their currencies and manipulate their trade.”

Bessant said that because many countries have "accumulated large surpluses, a free-form trading system has not developed." He said some of the reasons may be exchange rates, while "interest rate repression" may also be a factor in some places, but he did not point to specific countries.

The Bloomberg Dollar Spot Index was little changed when Bessant spoke, before falling to its lowest level of the day in afternoon trading in New York.

For decades, top U.S. officials have stressed the value of a strong dollar, touting it as evidence of the U.S. economic dynamism. During Trump’s first term, many saw the so-called strong dollar policy as sidelined because it was seen as suppressing U.S. exports and reducing overseas revenues for U.S. multinationals.

Still, the dollar has surged since Trump was elected president in November on expectations that his policies - especially higher tariffs and tax cuts - will boost economic growth and inflation and slow the pace of interest rate cuts by the Federal Reserve.

In recent events, Trump has vowed to maintain the dollar's global dominance and backed policies that economists and strategists say would boost the dollar's value.

“We want fair trade and part of that is taking a tough stance on exchange rates and terms of trade,” Bessant said.

Bessent this week proposed a new plan to lower historically high interest rates that has nothing to do with the Fed. In two interviews this week, Bessent said the Trump administration wants to focus on lowering long-term interest rates, which are largely influenced by the 10-year Treasury yield. The Fed's decisions have a more direct impact on short-term interest rates, which control borrowing costs for Americans.

Despite Trump's fierce criticism of the Fed, Bessant assured Wall Street that the administration would not try to "twist the Fed's arm" but would instead develop its own approach.

"He (Trump) is not calling on the Fed to cut rates," Bessant told Fox Business on Wednesday. Instead, he said the Trump administration is focused on lowering the 10-year Treasury yield. "If we deregulate the economy, if we get this tax bill done, if we get energy prices down, then interest rates will naturally adjust, and so will the dollar," he said.

“We’re not focused on whether the Fed is going to cut rates,” Bessant told Bloomberg TV on Thursday.

That may come as a relief to Powell as an implicit acknowledgment that the administration intends to respect the Fed’s right to make monetary policy decisions without any political influence.

Bessent's plan to separate the Treasury from the Fed is unusual. "It's very unusual for the Treasury and the White House to take an active role in influencing the 10-year yield. Historically, they have been working in concert with the Fed," Ryan Detrick, chief market strategist at the Carson Group, told CNN. "The government can only influence yields indirectly through fiscal policy and deregulation."

The interest rates Americans pay on mortgages, credit cards and other types of loans are largely determined by the yield on the 10-year Treasury bond. While the Federal Reserve's monetary policy actions can have an impact on it, the 10-year Treasury yield is free-floating, meaning anything can cause it to move up or down without the Fed's influence.

For example, during periods of heightened geopolitical conflict, investors tend to buy more U.S. Treasuries, including the 10-year Treasury note, which is considered a safe, stable investment asset, especially during times of uncertainty. The move to safe assets by investors pushes down yields, which in turn reduces borrowing costs for Americans.

As Bessant pointed out in an interview with Fox Business, when the Fed made an unusually large rate cut of 50 basis points in September last year, the 10-year Treasury yield should, in theory, have fallen. However, it ended up moving higher. This remained the case even after the Fed cut rates two more times last year.

However, the 10-year Treasury yield has fallen slightly since Trump took office. Bessant believes this reflects traders' recognition that holding U.S. government bonds would be less risky if federal spending is cut. White House press secretary Carolyn Levitt said last week that the administration is moving forward with plans to "end the egregious waste of federal funds," driven in part by the so-called Government Efficiency Department led by Tesla CEO Elon Musk.

The Trump administration says it is focused on boosting economic growth through "expansionary" policies. The Fed's plans to shrink government agencies and cut spending could keep growth from sparking inflation, which would have a positive impact on the national debt. "They want strong economic growth, but they also want to limit inflation expectations by controlling spending, and expectations of higher inflation right now are quite dangerous because tariffs have the potential to reignite commodity inflation," Jose Torres, senior economist at Interactive Brokers, told CNN.

“Moreover, the focus on the 10-year Treasury yield reasserts our long-standing independence of monetary policy, which should exclude any political influence. I think this is a good precedent worth re-emphasizing,” Torres said.