US blasts China for de­valu­ing cur­rency

Financial Chronicle - - FRONT PAGE - KATHER­INE GREIFELD & SALEHA MOHSIN

US pres­i­dent Don­ald Trump ac­cused China and Rus­sia of de­valu­ing their cur­ren­cies, break­ing from his own ad­min­is­tra­tion’s view that no ma­jor trad­ing part­ners are cur­rency ma­nip­u­la­tors.

Trump took to Twit­ter on Mon­day to de­clare that China and Rus­sia are play­ing what he called a “cur­rency de­val­u­a­tion game” at a time when the US Fed­eral Re­serve is rais­ing in­ter­est rates. “Not ac­cept­able!,’’ Trump wrote.

His com­ments con­tra­dicted a trea­sury depart­ment semi-an­nual re­port on Fri­day that re­frained from nam­ing any coun­try a cur­rency ma­nip­u­la­tor based on spe­cific cri­te­ria.

US PRES­I­DENT Don­ald Trump ac­cused China and Rus­sia of de­valu­ing their cur­ren­cies, break­ing from his own ad­min­is­tra­tion’s view that no ma­jor trad­ing part­ners are cur­rency ma­nip­u­la­tors.

Trump took to Twit­ter on Mon­day to de­clare that China and Rus­sia are play­ing what he called a “cur­rency de­val­u­a­tion game” at a time when the US Fed­eral Re­serve is rais­ing in­ter­est rates. “Not ac­cept­able!,’’ Trump wrote.

His com­ments con­tra­dicted a trea­sury depart­ment semi-an­nual re­port on Fri­day that re­frained from nam­ing any coun­try a cur­rency ma­nip­u­la­tor based on spe­cific cri­te­ria.

A trea­sury depart­ment spokesman re­ferred ques­tions to the White House.

The at­tack added fuel to the brew­ing trade dis­pute be­tween the US and China and drew swift crit­i­cism from Rus­sia, which the White House re­cently im­posed sanc­tions on and clashed with over Syria. The Bloomberg Dol­lar In­dex slipped to its low­est level since March 26 fol­low­ing Trump’s tweet, while Trea­suries fluc­tu­ated.

“The ba­sis for this ac­cu­sa­tion is in­com­pre­hen­si­ble, and it only elic­its a smile, be­cause both busi­ness and the gov­ern­ment are in­ter­ested in a sta­ble na­tional cur­rency,” said Ana­toly Ak­sakov, chair­man of the fi­nan­cial mar­kets com­mit­tee of Rus­sia’s lower house of par­lia­ment, ac­cord­ing to state news ser­vice RIA Novosti.

Trump has re­peat­edly blasted Bei­jing for fail­ing to re­duce its trade sur­plus and open its mar­kets to Amer­i­can in­vest­ment. China’s yuan, though, has gained about 10 per cent against the dol­lar over the past 12 months, climb­ing in March to the strong­est level since Au­gust 2015.

The ru­ble has weak­ened more than 9 per cent against the dol­lar in the past year, with much of the de­cline fol­low­ing the US’s in­tro­duc­tion of sanc­tions on dozens of Rus­sian ty­coons, com­pa­nies and key al­lies of pres­i­dent Vladimir Putin. The US said on Mon­day it will de­cide in the near fu­ture whether to im­pose ad­di­tional sanc­tions against Rus­sia.

Trump’s sug­ges­tion that a cur­rency war is on the hori­zon comes as cen­tral bankers and fi­nance min­is­ters from around the world pre­pare to gather in Wash­ing­ton for the spring meet­ings of IMF this week.

The trea­sury depart­ment’s for­eign cur­rency re­port on Fri­day ratch­eted up crit­i­cism of China’s fail­ure to cor­rect its trade im­bal­ance with Amer­ica and said the in­creas­ingly “non-mar­ket di­rec­tion” of China’s econ­omy pre­sented a risk to global growth. Rus­sia, how­ever, isn’t among the 12-largest trad­ing part­ners and Switzer­land that are as­sessed in the re­port. The Trea­sury said on Fri­day it was con­sid­er­ing ex­pand­ing the num­ber of economies tracked in the study.

China is eval­u­at­ing the im­pact of a grad­ual yuan de­pre­ci­a­tion as the coun­try’s lead­ers weigh their op­tions in the trade spat with the US, ac­cord­ing to peo­ple fa­mil­iar with the mat­ter. A weaker yuan makes im­ports from China to the US cheaper, driv­ing up Amer­ica’s trade deficit. The pres­i­dent has re­peat­edly com­plained about the US trade short­fall with China, which reached $337 bil­lion in goods and ser­vices last year.

Trump’s com­ments on Mon­day are “an­other im­plicit sig­nal of the ad­min­is­tra­tion’s de­sire for a weaker dol­lar – es­pe­cially against ma­jor trad­ing part­ners,” said Vi­raj Pa­tel, a Lon­don­based cur­rency strate­gist at ING Groep. “These weak dol­lar ex­pec­ta­tions will re­main en­trenched in cur­rency mar­kets, es­pe­cially if the ad­min­is­tra­tion con­tin­ues its mer­can­tilist pol­icy fo­cus.”

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