Researchers at Chatham House have indicated that the policies proposed by Donald Trump could boost the usd during his second term, but the rise of the usd may cause turmoil in global markets.

Chatham House, officially known as the Royal Institute of International Affairs, is a nonprofit non-governmental think tank based in London.

Michael Klein, a senior researcher at the think tank, wrote in a recent report that although Trump himself wants to see the usd decline to reduce the us trade deficit, the usd may rise under his leadership.

He wrote: "President-elect Donald Trump faces the dilemma surrounding the usd. In recent months, he has shown a clear preference for letting the usd fall to support the competitiveness of us export products and help reduce the us trade deficit."

"However, as the market has felt since the us election, the more likely outcome is that his policies will ultimately lead to an increase in the usd. The risk is that the already expensive usd will become more evidently overvalued, which may increase the risk to global financial stability," he added.

Klein warned that an increase in the usd could be bad news for other global economies. Given the widespread use of the usd in financial markets, if the usd rises, global trade may be suppressed. Meanwhile, countries that find their own currencies depreciating against the usd may find it more challenging to control inflation.

"If the usd becomes unsustainably expensive, a further question will arise: how to deal with an overvalued currency without risking significant financial turmoil. If the usd has little room for negotiation, more chaotic alternatives may emerge," he wrote.

The market has begun to notice the possibility of the usd increasing during President Trump's term. This measures the usd against a basket of mmf.$USD (USDindex.FX)$In the past month, it has risen by about 3% and briefly surpassed 107 on Thursday, reaching its highest level in a year.

Klein specifically mentioned Trump's comprehensive tariff plan. He pointed out that imposing tariffs on another country often leads to a devaluation of that country's currency, as traders tend to sell off that currency in the forex market.

"Therefore, imposing broader tariffs on all trade partners of the usa should result in a more widespread increase of the dollar." he added.

Klein also stated that Trump's tariff plan could trigger higher inflation and interest rates, which would support the dollar. He mentioned that other policies of Trump, such as his tax reduction plan, might also increase price pressure.

"Because boosting the economy of the usa will create inflationary pressures, the market will anticipate that interest rates will eventually be higher than what may have been expected. A combination of loose fiscal policy and tight monetary policy often leads to a stronger currency." he wrote.

However, Trump previously countered the notion that his policies might lead to higher prices and insisted that he would reduce inflation during his presidency. During his first term, he imposed tariffs on some commodities imported from china, but inflation did not rise significantly. However, economists indicated that his current tariff plan has a wider scope, thus increasing the likelihood of price rises.

Editor/Rocky