Donald Trump is unsure if strong or weak US dollar is best for the economy

The US President called Mike Flynn at 3am local time seeking clarity on what a rising or falling currency actually means for the US economy

A strong dollar means that travelling abroad is cheaper and that those holding US dollars, whether individuals or companies, have greater buying power

(Getty)

A report alleging that Donald Trump called his national security adviser in the middle of the night for guidance on whether a strong or a weak dollar is good for the economy has sparked criticism and ridicule across social media.

According to an article in The Huffington Post, citing two sources familiar with the matter, the US President called Mike Flynn at 3am local time seeking clarity on what a rising or falling currency actually means for the US economy. Mr Flynn reportedly told Mr Trump that he did not know.

Since winning the most divisive election in US history last November, Mr Trump’s often bold and abrasive tweets and comment have proved paramount to determining the mood and direction of markets. Repeatedly, the reality TV star-turned-politician has sent stocks soaring or diving and currency markets into a tailspin.

The dollar actually posted its worst January figures in three decades after Mr Trump and his trade adviser accused Germany, China and Japan of exploiting currencies to gain a trade advantage over the US.

Lessons in eloquence with Obama and Trump

“I’ve been in this town for 26 years. I have never see anything like this,” Eliot Cohen, a senior state department official under President George W Bush and a member of his National Security Council, told The Huffington Post on the reports of the President’s late-night currency call to Mr Flynn.

“I genuinely do not think this is a mentally healthy president,” he added.

Jason Kucsma tweeted: “RT [retweet] if you know the difference between a strong dollar and a weak dollar.”

Another Twitter user tweeted: “God help us” and: “better call @DeanBaker13,” the Twitter account belonging to a well-known economist.

In response to the report Dean Baker tweeted: “This is a total distortion.Trump didn’t call Flynn at 3:00 AM to ask about the value of the dollar, he called because he wanted to borrow $20.”

Rafael Khachaturian tweeted: “If Trump doesn’t know strong v. weak dollar, anyone believe he actually knew what he was talking about with Chinese currency manipulation?”

But what actually is the answer to Mr Trump’s question? Is a strong currency better for a country’s economy, or is a weak currency more advantageous? The short answer is that it depends.

A strong dollar means that travelling abroad is cheaper and that those holding US dollars, whether individuals or companies, have greater buying power. In other words, their money will be worth more outside of the country. Based on that same logic, imports also become cheaper, which can be good for an economy. Think about German cars, for example: if the dollar rises, then the dollar price of those cars converted from euros, will go down.

On the other hand, a strong dollar also means that tourism to the US becomes more expensive because those holding other currencies won’t get as much for their money.

Importantly, exporters also tend to feel the pain of a strong dollar because their goods become relatively more expensive abroad.