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Dollar drops to 3-year low after Mnuchin praises weak US currency

Dollar drops to 3-year low after Mnuchin praises weak US currency
© Greg Nash

The U.S. dollar dropped to a three-year low on Wednesday after Treasury Secretary Steven MnuchinSteven Terner MnuchinOvernight Finance: IMF chief warns against US-China trade war | Trump, Abe can't strike deal on tariff exemptions | Republicans push Trump to rescind Gateway funds Mnuchin on Haley's Russia sanctions comments: 'She wasn't left twisting in the wind' Russia vows 'painful' response to any US sanctions MORE praised the declining value of the currency in remarks at the World Economic Forum in Davos, Switzerland.

The ICE U.S. Dollar Index, which measures the strength of the dollar against six other currencies, dropped 0.5 percent to 89.66 on Wednesday, marking the first time in three years the index has fallen under 90 points. The previous low was 70.69 at the height of the U.S. financial crisis in March 2008.

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News of the dollar's drop comes just a day after Mnuchin told business leaders in Davos that a sinking dollar value "is good for us as it related to trade and opportunities."

"Longer-term, the strength of the dollar is a reflection of the strength of the U.S. economy and the fact that it is and will continue to be the primary currency in terms of the reserve currency," Mnuchin said Wednesday.

President TrumpDonald John TrumpFlynn to campaign for Montana GOP Senate candidate Trump considering pardon for boxing legend after call from Sylvester Stallone Decline in EPA enforcement won't keep climate bill from coming MORE has also spoken in favor of a weaker dollar to help boost exports for American manufacturers.

But some analysts say a weaker dollar could also hurt American consumers by forcing them to pay more for foreign goods.

"The reform momentum of the Trump administration has received another blow," said strategists at Morgan Stanley last year when the dollar fell to a 10-month low in July.

The euro, meanwhile, saw its value shoot up to a three-year high, trading at $1.2349 Wednesday, up from $1.2298 the day before.

The U.K.'s pound also saw a jump in value, trading at $1.4097 on Wednesday, up from $1.4 on Tuesday.