If the currency markets were looking for a savior to arrest the greenback’s recent slide, they didn’t find one in Boston on Monday.
Federal Reserve Governor Stephen Miran, speaking at Boston University’s Questrom School of Business, effectively gave the foreign exchange markets a pass, signaling that the central bank has no immediate intention of tightening the screws to prop up a sagging dollar. In a speech that resonated with the "competitive currency" views he championed before joining the Board, Miran brushed off concerns that the dollar's recent depreciation would reignite the inflation fire the Fed has spent years fighting.
"The weakening dollar is not currently posing a major problem for the central bank," Miran told the assembly, offering a dovish reassurance that sent ripples through trading desks from New York to Tokyo. His rationale? The "pass-through" effect—where a cheaper currency makes imports more expensive—is currently too weak to move the needle on consumer prices.
The "Miran Doctrine" in Action
Miran’s comments are more than just a momentary soothe-saying; they represent a distinct shift in the Fed’s intellectual gravity. Historically, central bankers get jittery when their currency swoons, fearing it acts as a backdoor for imported inflation. But Miran, an architect of the so-called "Mar-a-Lago Accord" framework during his time as a Treasury advisor, has long argued that the US manufacturing base has been suffocated by an overvalued dollar.
By stating that the decline has "little impact on consumer inflation" unless the move is "very sharp," Miran is essentially delineating a safe zone for depreciation. He’s telling the market: You can sell the dollar, and we won’t stop you—as long as it’s orderly.
"So far, I don't think it has had any substantial impact on monetary policy," he added, a line that likely emboldened dollar bears who have been hammering the DXY index since early last week.
The Warsh Effect: A Hawk in Dove’s Clothing?
The backdrop to Miran’s insouciance is the tectonic shift awaiting the Fed’s leadership. The dollar index (DXY) dipped on Monday, erasing a nearly 1% rebound from the previous week, largely driven by the "Warsh Trade."
President Trump’s nomination of Kevin Warsh to succeed Jerome Powell has injected a heavy dose of uncertainty into the forward curve. Warsh, a former Fed Governor with a reputation for understanding the plumbing of Wall Street better than the models of academia, is a complex figure for traders to parse.
While Warsh has hawkish instincts regarding the Fed’s balance sheet—viewing the central bank’s massive asset holdings as a distortion of free markets—he is also seen as a reformist who might align with the administration’s desire for a pro-growth, lower-rate environment.
The market is currently trying to solve a difficult equation:
- Miran wants a competitive (weaker) dollar to boost industry.
- Warsh wants a smaller balance sheet (usually dollar-positive) but arguably lower rates to spur productivity (dollar-negative).
The result? Volatility. The dollar is caught in the crossfire of these competing doctrines.
The June Pivot
With Miran downplaying the inflationary risks of a weak dollar, the runway is being cleared for the Fed to cut rates. According to the CME Group's FedWatch tool, the smart money has now fully priced in the first rate cut of the year for June 2026.
The timing is hardly coincidental. June represents the potential handover period where the "Warsh Era" officially begins. If Miran’s view holds—that the dollar can drift lower without spiking CPI—the new Chair could take office with the flexibility to cut rates immediately, framing it as a "productivity adjustment" rather than a rescue mission.
What This Means for Your Portfolio
For investors, the signal from Boston is clear: Don’t fight the fade.
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Forex: The "King Dollar" trade that dominated the early 2020s is unwinding. With the Fed signaling indifference to weakness, currencies like the Yen and the Euro may have further room to run, especially if their respective central banks remain hawkish.
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Commodities: A weaker dollar is traditionally rocket fuel for commodities. Gold and silver, which have been choppy, could find a renewed bid as the dollar’s purchasing power recalibrates.
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Equities: Large-cap multinationals with significant overseas revenue (the Coca-Colas and Apples of the world) stand to benefit as their foreign earnings translate into more dollars. Conversely, purely domestic importers might see margin compression if they can’t pass on costs—though Miran suggests this risk is low.
The Bottom Line
Governor Miran has shown his cards. The Fed is not going to use the dollar as a constraint on policy. This removes a key floor from the currency market and shifts the spotlight entirely to domestic data.