I can’t excerpt this post by former Fed governor Narayana Kocherlakota at Bloomberg enough to explain my point without quoting the whole thing.
Isn’t Dr. Kocherlakota saying that the U. S.’s increasing exports would be a bad strategy? I seem to recall a number of articles from just a day or so ago pointing to a U. S. cheese glut that resulted from the stronger dollar.
He doesn’t appear to understand currencies change exchange rates for different reasons: they can fluctuate based on trading sentiment as is happening to the dollar right now and they can change because demand for foreign goods changes and exporters can then demand higher prices.
I would also argue he has the relationship between the interest rate and depreciation backward. After a multi-year bull run the dollar began depreciating immediately following the Fed’s rate increase in December of last year. With a budget deficit fallen to the point traders can’t find enough Treasuries, holding off on rate hikes will likely worsen the supposed mild effects of dollar appreciation rather than moderate as he suggests.