Could the U.S. Target a Weaker Dollar?

February 19, 2026

AI Summary

5 min read

🎙️ The Voices & The Context

The Format: Casual expert chat between two Morgan Stanley economists dissecting currency markets in a short, daily podcast episode.
The Key Players:
- James Lord: Global Head of FX and EM Strategy; drives the FX market analysis and client insights.
- Seth Carpenter: Global chief economist and head of macro research; brings Treasury experience and policy nuance.
The Vibe: Educational and analytical—professional banter on complex finance, with a focused, optimistic tone on market opportunities.

🗝️ Key Themes & Topics

The episode unpacks US dollar dynamics amid policy shifts, interventions, and global central bank moves, blending historical context with forward-looking forecasts.

Topic 1: Defining the "Strong Dollar Policy": Hosts clarify it's a vague Treasury-led concept emphasizing market-determined rates and the dollar's global dominance, not a fixed target. Tension arises from pushing strength while advocating free markets; it supports foreign policy leverage like sanctions but allows flexibility for interventions.
Topic 2: FX Intervention and Recent Events: Discussion on post-dollar-yen "rate check" speculation of US targeting a weaker dollar, Kevin Walsh's Fed nomination boosting USD, and administration nuances (e.g., Miran's critique of reserve status harming trade).
**Topic 3: Dollar Outlook

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What you'll learn

1 (00:10) **US Currency Policy and Recent News**
2 (01:04) **Defining the Strong Dollar Policy**
3 (03:02) **Intervention Compatibility with Strong Dollar**
4 (05:19) **Dollar Outlook: Next 3-12 Months**
5 (07:37) **Emerging Market Currency Opportunities**

+ Full timestamped outline available in the app

Show Notes

Our Global Head of FX and EM Strategy James Lord and Global Chief Economist Seth Carpenter discuss what’s driving the U.S. policy for the dollar and the outlook for other global currencies.

Read more insights from Morgan Stanley.

----- Transcript -----

James Lord: Welcome to Thoughts on the Market. I’m James Lord, Global Head of FX and EM Strategy at Morgan Stanley.

Seth Carpenter: And I'm Seth Carpenter, Morgan Stanley's Global Chief Economist and Head of Macro Research.

James Lord: Today we're talking about U.S. currency policy and whether recent news on intervention and nominations to the Fed change anything for the outlook of the dollar.

It's Thursday, February 19th at 3pm in London.

So it's been an interesting few weeks in currency markets. Plenty of dollar selling going on But then, we got news that Kevin Warsh is going to be nominated to Chair of the Board of Governors. And that sent the dollar back higher, reminding everybody that monetary policy and central bank policy still matter.

So, in the aftermath of the dollar-yen rate check, investors started to discuss whether or not the U.S. might be starting to target a weaker currency. Not just be comfortable with a weaker currency, but actually explicitly target a weaker currency, which would presumably be a shift away from the stronger strong dollar policy that Secretary Bessent referenced.

So, what is your understanding? What do you think the strong dollar policy actually means?

Seth Carpenter: Strong dollar policy, that's a phrase, that's a term; it's a concept that lots of Secretaries of the Treasury have used for a long time. And I specifically point to the Secretary of the Treasury because at least in the recent couple of decades, there has been in standard Washington D.C. approach to things, a strong dichotomy that currency policy is the policy of the Treasury Department, not of the central bank. And that's always been important.

I remember when I was working at the Treasury Department, that was still part of the talking points that the secretary used. However, you also hear Secretaries of the Treasury say that exchange rates should be market determined; that that's a key part of it. And with the back and forth between the U.S. and China, for example, there was a lot of discussion: Was the Chinese government adjusting or manipulating the value of their currency? And there was a push that currencies should be market determined. And so, if you think about those two things, at the same time – pushing really hard that the dollar should be strong, pushing really hard that currencies should be market determined – you start to very quickly run into a bit of an intellectual tension. And I think al