Boston

DONALD Trump's proposed tax cuts risk further appreciation of the dollar and widening of the US current account deficit. These developments would complicate the president-elect's efforts to stem manufacturing job losses and overwhelm initiatives to slow the offshoring of US factories. Tax cuts in 2017 should be accompanied by measures to reduce the federal budget deficit and promote private savings. Without these measures, there is substantial risk of a dollar overshoot reminiscent of the predicament during president Ronald Reagan's administration.

Between Nov 8 and Dec 9, the Federal Reserve's trade-weighted broad dollar index rose by around 3.5 per cent. The yen fell by 8.8 per cent, and several emerging market currencies - including the Mexican peso (minus 10 per cent) and Turkish lira (minus 9.2 per cent) - sold off sharply.