One question hanging in the air right now: How might the U.S. attack on Venezuela affect the value of the dollar?
Full Transcript:
While markets have been mostly shrugging off President Donald Trump’s decision to forcibly remove a foreign leader from office over the weekend, market participants still have plenty of questions about how the situation in Venezuela will affect geopolitics and geoeconomics.
One question hanging in the air right now is how the U.S. attack on Venezuela could affect the value of the dollar.
“We’ve already gotten a lot of questions from clients. And a ton of concern about where things are going to be headed going forward,” said Juan Perez, director of trading at MonexUSA.
He said many of his clients are companies trying to figure out whether they should make cross-border payments at today’s foreign exchange rates. They want to know if the dollar is going go up or down, but the problem is, Perez said, he doesn’t really have an answer.
“This is such a show of strength — does that mean, going forward, that the U.S. dollar is just going to rise in value? Right? That’s one interpretation. Or, does this concern the world so much that it’s going to isolate the United States even more, in which it creates higher value for alternatives?” he said.
Another big open question is whether this could affect the U.S. economy.
Kathy Bostjancic, chief economist at Nationwide, said she’s been fielding questions from clients about what could happen to oil prices.
“You know, what impact could this have on oil production from Venezuela, and then, eventually, how does that feed through to consumer price inflation,” she said.
If Venezuela does hike oil production, all else equal, Bostjancic said that should lower oil prices, which should boost consumer spending.
But she said even that basic theory is iffy.
“It may take years for that to play out,” Bostjancic said.
Not every corner of the finance sector is worried about the effects of the U.S. forcibly removing Venezuela’s president.
But Dominik Mjartan, CEO of American Pride Bank in Macon, Georgia, said many of his clients have been getting more concerned about economic instability.
“So I think in their mind, this geopolitical instability is just going to add to it,” he said.
Mjartan said some clients have been dealing with weakening revenues and persistently high costs. As a result, many of them are being cautious, which affects the bank, too.
“So am I going to open another branch, am I going to hire more people, am I going to expand into markets? A year ago, I would have said absolutely. Economy’s booming, everything’s going well,” Mjartan said.
But today? Probably not, he said.
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