With the US midterm elections weeks away, a surging dollar is exposing a central contradiction in President Donald Trump's economic agenda: currency markets are delivering the opposite of what his administration wants.

Trump's economic record in the first two years of his second term is being heavily scrutinized. Polls show voters' approval of his handling of the economy has rarely been lower. That goes a long way toward explaining why betting markets point to his Republican Party losing control of the House of Representatives, and perhaps even the Senate, on November 3.

Yet if there's any truth to the market adage that a country's currency is a reflection of the world's confidence in its economy, Trump should be going into the upcoming vote brimming with confidence. The dollar (.DXY) has been rising steadily, recently hitting its strongest level in 18 months against major peers.

But a strong and appreciating exchange rate is the last thing Trump wants. His administration's economic and trade policies are aiming to revive US manufacturing, make American exports great again and shrink the trade deficit. A strengthening currency won't help with any of that.

One might expect the dollar to be under pressure, especially given that the US trade balance has not narrowed according to the administration's plan. Imports have exploded to record levels, largely driven by US companies hoovering up the chips, equipment and goods needed for the AI build-out, and the country's trade deficit is widening. It was 2.7% of gross domestic product earlier this year — one of the smallest readings of the century — but it could be headed for 4% of GDP next year, according to Dean Maki at hedge fund Point72.

But the dollar is not weakening. It did during Trump's first year back in the Oval Office, amid concerns about "dollar debasement" and a "sell America" mentality among foreign investors fostered by Trump's tariffs, but that has since gone into reverse.

Why? Because exchange rates are relative, and the greenback currently appears to be the proverbial "cleanest dirty shirt." While the US is suffering from acute debt and deficit concerns, so are other developed countries, most notably France. Investors fear that Paris is unwilling to take the politically unpalatable steps to get its budget under control and are thus slamming the euro .

Similarly, worries that higher interest rates will make it nearly impossible for Japan to service its enormous debt load have anchored the yen near its recent historical lows.

In short, the dollar is "winning" as much by default as it is benefiting from the flood of global capital chasing the US AI dream. This is not what the White House had in mind.

Trump and Treasury Secretary Scott Bessent clearly want a weaker dollar, even if decades of a quasi-official "strong dollar" policy at the White House — dating back to the days of former Treasury Secretary Robert Rubin in the 1990s — make it challenging for them to say so outright.

The Trump administration's views on the US currency were flagged almost exactly two years ago in "A User’s Guide to Restructuring the Global Trading System," a paper by Stephen Miran, then a senior strategist at hedge fund Hudson Bay Capital Management.

Miran went on to serve as chairman of the Council of Economic Advisers under Trump, who later appointed him as a Federal Reserve governor for a short spell. He has since returned to HBC, but his 41-page manual still appears to serve as a broad framework for the administration's trade, currency and economic policy.

The blueprint has come to be known as the "Mar-a-Lago Accord," in a nod to the famous 1985 "Plaza Accord," under which the world's leading economic powers agreed to devalue the dollar.

Echoing Trump's decades-long view, Miran wrote that "deep unhappiness with the prevailing economic order is rooted in persistent overvaluation of the dollar ... (which) makes US exports less competitive, US imports cheaper, and handicaps American manufacturing." He has a point. At the time of Trump's inauguration in January last year, the dollar's broad, real effective exchange rate was the strongest in over 30 years.

Miran argues that the global trade and financial systems can be rewired to America's benefit, but the path "is narrow, and will require careful planning, precise execution, and attention to steps to minimize adverse consequences." Americans casting their midterm election votes on November 3 may not have the patience for this. While the US economy continues to grow at a healthy pace and unemployment remains low, households are feeling the adverse economic consequences of Trump's policies over the past two years.

Tariffs have raised the cost of imported goods, according to a recent New York Fed study, and the US war with Iran, launched in February, has led to soaring energy costs, most notably record-high diesel prices at the pump. As a consequence, inflation remains elevated, bond yields are the highest in a quarter of a century, and real wages are now falling.

Given all this, the big question is whether the American public will give the Trump administration the space to try to turn the dollar's tide.

Efforts to reverse the dollar's march higher will be challenging, to put it mildly. History suggests that what's needed is multilateral, globally coordinated action, but that is the antithesis of Trump's "America First" worldview.

Piecemeal and bilateral actions, like the Treasury's recent intervention with Japan to support the yen , are likely too small to have any lasting impact. Further interventions cannot be ruled out if the dollar continues to strengthen.

For example, when writing about the yen, Stephen Jen, CEO of Eurizon SLJ Asset Management, recently argued that a series of targeted, surprise "mini" interventions could chip away at the dollar without triggering an avalanche of depreciation, helping the Trump administration meet its foreign exchange and wider goals over time. "The Trump Administration ... wants to find ways to guide the dollar lower.

This is needed because, in order for the US to attain economic security, it needs to reclaim a certain level of manufacturing self-sufficiency. To do that, a weaker dollar would be necessary. The challenge, of course, is to guide the dollar lower without spooking the capital markets," Jen wrote in May.

Much will depend on the frequency and size of such moves. Official action to weaken the dollar against major currencies is rare. Before this year's yen intervention, the last time US and Japanese authorities coordinated to sell dollars against the yen was in 1998. The Fed intervened with the European Central Bank and other authorities to support the euro, but that was back in late 2000, just after the single currency's launch.

Since the era of free-floating exchange rates began in the early 1970s, when President Richard Nixon took the US off the gold standard, there have only been two truly global efforts to force a change in the dollar's broad value. Both were in the 1980s: the Plaza Accord in 1985 to lower what was an extremely elevated dollar, and the Louvre Accord in 1987 to essentially take the sting out of Plaza.

These accords were products of their time. The dollar is nowhere near as strong as it was back then, and that was an era when multilateral cooperation was still in vogue. As the country looks set to enter the final two years of the Trump era, the dollar's relative strength could say much about how much of his economic agenda he has been able to achieve since first entering the White House almost 10 years ago.

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