(Reuters) - The Trump administration’s dollar policy is not clear, and the currency’s further near-term strength will depend mainly on the speed of Federal Reserve interest-rate hikes, according to a majority of foreign exchange strategists polled by Reuters.

A packet of former U.S. President Abraham Lincoln five-dollar bill currency is inspected at the Bureau of Engraving and Printing in Washington March 26, 2015. REUTERS/Gary Cameron/File Photo - RTX2SMNQ

Since 2017 began, uncertainty over U.S. President Donald Trump’s economic policies has whipsawed the dollar, but continued promises of fiscal stimulus, without details, have sent stock markets to set record highs at breakneck speed.

There has also been widespread confusion over whether the White House prefers a strong dollar, which analysts say is where its proposed policies logically lead.

“We think the market is getting rather tired of the U.S. administration’s flamboyant rhetoric and needs considerable clarity,” said Vasileios Gkionakis, global head of FX strategy at UniCredit.

While on the campaign trail Trump voiced his preference for a weaker exchange rate, new U.S. Treasury Secretary Steven Mnuchin said a stronger dollar reflected confidence in the government’s policies, even though they would probably have a limited impact this year.

“The Trump administration prefers a weak dollar, but its proposed policies - namely, fiscal expansion, limits on imports, and border taxes - will tend to make the dollar stronger,” said William Adams, senior international economist at PNC Financial Services in Pittsburgh.

That has left more than 80 percent of the poll’s more than 60 strategists saying the dollar policy is not clear.

UniCredit’s Gkionakis said Trump and Mnuchin had indicated they wanted their tax proposals to pass by August.

“At some point, President Trump will need to put his money where his mouth is,” Gkionakis said. “Without clarity on the size, shape and timing of his ‘phenomenal’ plans, the market will become impatient, and the (U.S. dollar) will see major headwinds.”

After starting the year with its worst performance in three decades, the dollar has retraced some of those losses. It hovered near a seven-week high on Thursday on increasing bets that the Fed is seriously considering raising interest rates this month.

UPSIDE OR DOWNSIDE RISKS?

That was reflected in the consensus in the latest Reuters poll taken over the past week, which showed moderate further gains for the dollar against most major currencies.

Asked about the risks to dollar predictions over the coming year, analysts were nearly split. Twenty-nine of 56 who answered said risks skewed more to the upside, and 27 said they tilted to the downside.

Before the January dollar sell-off, a strong majority of strategists were convinced the risks were more to the upside.

Fed officials over the past few days have suggested rates need to go up sooner rather than later to avoid falling behind the curve on inflation in the face of proposed aggressive economic fiscal stimulus from Trump’s administration.

That resulted in a huge swing in market expectations for a March rate hike, from around 30 percent at the start of the week to roughly 70 percent on Thursday.

Several Fed policymakers have also warned that with the economy at a late stage of the recovery cycle, any expansive fiscal policy could result in a faster-than-expected pace of rate increases.

Federal Reserve Governor Jerome Powell added his voice to the mix on Thursday, saying in an interview on CNBC that the case for a March rate hike had “come together.”

But almost three-fourths of the 59 strategists who answered an extra question said the near-term risks to their dollar predictions were skewed more to the downside if the promised fiscal stimulus is delayed to next year.

Currency speculators have increased outright bullish bets for the U.S. dollar for the first time in seven weeks, at the expense of the euro, according to the latest data.

While economic data suggests the euro zone economy is performing well, the currency has come under pressure in recent weeks.

Concerns that anti-European Union candidate Marine Le Pen could win the French presidential election in May and deliver a fatal blow to the euro project have pushed the single currency lower, as has a growing interest-rate gap between the region and the United States.

The latest Reuters poll consensus is for the euro to drift lower against the dollar to $1.04 in six months. Respondents then expect it to weaken to $1.03 in a year, a fall of almost 2 percent from $1.05 on Thursday.

Data on Thursday showed euro zone inflation rose to 2.0 percent in February, as expected, on higher energy prices, meeting the European Central Bank’s target.

But with core inflation still stuck well below the central bank’s target and significant risk of political upsets in upcoming elections in key euro zone countries, strategists expect the ECB to remain on the sidelines. [ECB/INT] [ECILT/EU]