Trump ac­cuses China and Rus­sia of de­lib­er­ately de­valu­ing their cur­ren­cies

The Daily Telegraph - Business - - Business - By Anna Isaac

US PRES­I­DENT Don­ald Trump took a swing at the Rus­sian and Chi­nese regimes on Twit­ter yes­ter­day, in his lat­est state­ment on ris­ing trade ten­sions.

Mr Trump said that there was a de­lib­er­ate at­tempt by these coun­tries to de­value their cur­ren­cies at a time of ris­ing in­ter­est rates in Amer­ica, sug­gest­ing the na­tions were de­lib­er­ately at­tempt­ing to de­rail the US econ­omy.

This fol­lows the sharp de­val­u­a­tion of the Rus­sian rou­ble in the wake of the an­nounce­ment of swinge­ing US sanc­tions. Mr Trump said: “Rus­sia and China are play­ing the Cur­rency De­val­u­a­tion game as the US keeps rais­ing in­ter­est rates. Not ac­cept­able!”

The deputy Rus­sian fi­nance min­is­ter claimed yes­ter­day that the coun­try and its G20 and Brics al­lies were dis­cussing the dom­i­nance of the US dol­lar as a re­serve cur­rency, ac­cord­ing to Rus­sian state news agency RIA.

It is un­likely that there has been a de­lib­er­ate ef­fort by these coun­tries to de­value their own cur­ren­cies in re­sponse to US for­eign pol­icy. A range of fac­tors, in­clud­ing the global dom­i­nance of the dol­lar, ris­ing US in­ter­est rates and planned tar­iffs against China and sanc­tions against Rus­sia, have com­bined to re­sult in de­val­u­a­tions.

Ben May of Ox­ford Eco­nom­ics said: “Eco­nomic the­ory would sug­gest that if you raise your in­ter­est rates that it is likely to lead to a stronger cur­rency. But to a cer­tain de­gree you can’t ex­plain cur­rency move­ments with one side of an ar­gu­ment. More of­ten than not it’s go­ing to be a com­bi­na­tion of events.”

Mount­ing po­lit­i­cal ten­sions will have made safe haven cur­ren­cies more at­trac­tive, but Mr May said, “Rus­sia is clearly not a safe haven in this con­text.”

Mr Trump’s so­cial me­dia post may also be a thinly veiled cri­tique of Jerome Pow­ell, the head of the Fed­eral Re­serve and top in­ter­est rate-set­ter, who said that the US gov­ern­ment was not on a “sus­tain­able fis­cal path”.

The tweet also comes af­ter Japan lent its sup­port to free trade, fol­low­ing highly un­usual meet­ings be­tween Taro Kono, Japan’s for­eign min­is­ter, and Wang Yi, the Chi­nese gov­ern­ment’s top diplo­mat.

The meet­ings, set up to dis­cuss eco­nomic in­ter­ests, were the first of their kind for seven years and have been held less than a week be­fore talks be­tween Prime Min­is­ter Shinzo Abe and Pres­i­dent Trump later this week.

Mr Kono said: “We have shared un­der­stand­ing that a trade war… would have a very large im­pact on the pros­per­ity of the in­ter­na­tional econ­omy.”

Japan’s back­ing of China’s bid to raise sup­port for free trade and the supremacy of the World Trade Or­gan­i­sa­tion in set­tling dis­putes, comes amid ris­ing con­cerns about the US pres­sure for a bi­lat­eral Japan-US trade deal.

Mr Trump has raised the pos­si­bil­ity of re­join­ing the Trans Pa­cific Part­ner­ship, hav­ing pulled out of the planned Asia-Pa­cific trade pact just last year. Some be­lieve that the move was an at­tempt at turn­ing the screw on Tokyo ahead of talks this week.

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