Larry Fink, the head of BlackRock, the world's largest asset manager, seemed to concur with Trump when, according to Bloomberg, he told an audience in Washington, DC, on Wednesday night that the strong dollar was one reason for slow economic growth.
But the direction of the US economy and monetary policy all point to a strengthening dollar and limit how much Trump can talk down the greenback, said Alan Ruskin, the head of G-10 FX strategy at Deutsche Bank.
"Jawboning only has a sustained reaction if it is pushing on an open door, i.e. in the current example, if fundamentals were already pointing toward USD weakness, which they are not," Ruskin said in a note on Wednesday.
The best thing about a strong dollar is that it sounds good, Trump said in the Journal interview. It also makes international travel and shopping cheaper for Americans.
But it also makes US exports less competitive, because countries can opt for goods that are denominated in cheaper currencies. And that's Trump's main issue with the strong dollar.
The US dollar index, which measures it against a basket of other currencies, slid after Trump's remarks. Ruskin said any dollar weakness because of Trump's comments was likely to be temporary. And if good economic data continues to push the Federal Reserve to raise interest rates, that only helps the dollar, he added.
Trump's own economic agenda could work against his call for the dollar's strength to moderate.
If the economy gets a dose of fiscal stimulus and improves as he promised, that won't drive investors away from the dollar.
Ruskin added that if the US implements its proposed border adjustment tax — which Trump said Wednesday he would rather call a reciprocal or matching or mirror tax — a stronger dollar would be needed to offset the resulting inflationary pressures.
There's also a political limitation to how much Trump can talk up the dollar. In the Journal interview, Trump said he would no longer label China a currency manipulator. But if the US wishes to continue to comment on the foreign-exchange practices of other G-20 countries, Trump's verbal intervention would undermine those efforts, Ruskin said.
"That said, in the US Treasury's criteria of currency manipulation, jawboning does not count," Marc Chandler, the global head of currency strategy at Brown Brothers Harriman, said in a note. "Still, it seems a departure from the G-7 and G-20 agreements, and like areas, this is an example of unilateralism."
At best, Trump could encourage some investors to reduce their long-dollar positions — buying that's based on a bet the dollar would rally. Dollar bulls unwound some of their bets as the postelection bump to the greenback faded in 2017, according to Bank of America Merrill Lynch.
More From Business Insider