For Mnuchin, a Lesson in How Words Can Move Markets

DAVOS, Switzerland — His name now appears on the dollar bill. But that does not mean it is safe for him to actually talk about the dollar.

Treasury Secretary Steven Mnuchin got a searing reminder of that this week when an apparently offhand comment, that a weak dollar benefits American trade, helped plunge the currency to a three-year low and touched off a flurry of speculation about the Trump administration’s economic plans.

The market-moving hullabaloo highlighted the sensitivity about President Trump’s “America First” trade agenda here at the World Economic Forum, the annual gathering of capitalist titans and world leaders. If the United States were reversing more than two decades of policy, as some feared Mr. Mnuchin’s comment indicated, it could initiate a return to the currency wars that once roiled the global economy.

But Mr. Mnuchin insisted on Thursday that was not the case. He meant his previous remark only as a statement of fact, not an objective of the administration or another tool in Mr. Trump’s war against what he considers unfair practices by America’s trading partners. Mr. Mnuchin, a former hedge fund manager and Goldman Sachs executive, deemed the resulting tumble of the dollar to be an enormous overreaction by the world’s money traders.

“I thought my comment on the dollar was actually quite clear yesterday,” he told reporters hours before Mr. Trump arrived in Davos. “I thought it was actually balanced and consistent with what I’ve said before, which is we’re not concerned with where the dollar is in the short term, it’s a very, very liquid market, and we believe in free currencies. And that there’s both advantages and disadvantages of where the dollar is in the short term. Let me say, I thought that was clear.”

Maybe it should have been. But Treasury secretaries have learned over the years that comments they thought were clear have not always been taken that way. More than perhaps any other official in the American government except the Federal Reserve chief, a Treasury secretary finds his remarks flyspecked to an extraordinary degree, with each word often given far more meaning than intended.

Treasury secretaries normally are highly disciplined when they speak on the dollar to ensure their words are treated seriously when they want to signal policy shifts or to build confidence in challenging economic moments,” said Gene Sperling, who served as the top economic adviser to Presidents Barack Obama and Bill Clinton. “This type of seemingly off-the-cuff and politically careless back and forth just erodes that type of authority when it will be most needed.”

Tony Fratto, who was a Treasury Department official under President George W. Bush, said that Mr. Mnuchin had just come across the same tripwire that his predecessors had stumbled over, but that it was part of learning the job.

“It’s not surprising that a Treasury secretary has one of these moments — almost all of them do,” he said. “The reason is that the language of currency markets is different from everyday rhetoric. In fact, it’s even different from everyday economic rhetoric. I worked for three Treasury secretaries, and I’m friends with three others. Almost every Treasury secretary I know has had to acquire that language on the job.”