Last week at the World Economic Forum in Davos, U.S. Treasury Secretary Steven Mnuchin made a comment about how a weak dollar benefits American trade.

The comment sent the dollar tumbling to a 3-year low, although much of the drop was reversed when President Trump made positive comments about the dollar a couple of days later.

Mnuchin took a lot of flak for his words, but what he said was absolutely true. It's just that traditionally, U.S. Treasury Secretaries have not said those words aloud. There has been a long-standing tradition in the Treasury department to avoid any language about a weakening dollar.

It's unclear to us whether the remark was a mistake or part of the administration's broader “America First” agenda.

In previous administrations, officials making public comments chose their words carefully with an eye toward any impact they might have on the markets.

Alan Greenspan famously remarked on “irrational exuberance” when referencing the stock market in the '90s, for instance. And a few years ago, European Central Bank President Mario Draghi stopped European market bleeding in its tracks when he said the bank would do “whatever it takes” to support the euro zone economy.

So, do words still matter – even if they are not backed up by actions?

Theoretically, the U.S. Treasury can engage in policies – specifically currency manipulation – to actively weaken the dollar and make U.S. exports more attractive via a weaker currency. But for the past several decades, U.S. administrations – the current administration included – have been ardent supporters of market-determined exchange rates.

There have been some U.S. interventions in the past related to the Japanese yen and the euro, but those were unique situations and undertaken in active cooperation with other governments. Unilateral currency market intervention certainly has been a topic for export-oriented countries like Japan, China and Switzerland, but in modern-era U.S., our government has not overtly pushed down the value of the dollar.

With the uncertainty around this topic, it will be particularly interesting to hear what Secretary Mnuchin has to say when he speaks to the Los Angeles World Affairs Council on Feb. 26.

We will be there, and listening closely to hear if Mnuchin utters the words “weak” and “dollar” together again.

If we can help you with any Foreign Exchange needs, please email or call (800) 447 4133.

The information in this report was compiled by the staff at City National Bank from data and sources believed to be reliable but City National Bank makes no representation as to the accuracy or completeness of the information. The opinions expressed, together with any estimate or projection given, constitute the judgment of the author as of the date of the report. City National Bank has no obligation to update, modify or amend this report or to otherwise notify a reader in the event any information stated, opinion expressed, matter discussed, estimate or projection changes or is determined to be inaccurate. This report is intended to be a source of general information. It is not to be construed as an offer, or solicitation of an offer, to buy or sell any financial instrument. It should not be relied upon as specific investment advice directed to the reader’s specific investment objectives. Any financial instrument discussed in this report may not be suitable for the reader. Each reader must make his or her own investment decision, using an independent advisor if prudent, based on his or her own investment objective and financial situation. Prices and availability of financial instruments are subject to change without notice. Financial instruments denominated in a foreign currency are subject to exchange rate risk in addition to the risk of the investment. City National Bank (and its clients or associated persons) may, at times, engage in transactions in a manner inconsistent with this report and, with respect to particular securities and financial instruments discussed, may buy from or sell to clients or others on a principal basis. Past performance is not necessarily an indication of future results. This report may not be reproduced, distributed or further published by any person without the written consent of City National Bank. Please cite source when quoting.