“To engage in any action that would lead the Chinese to misunderstand actions by the US and therefore sell these holdings would be dangerous,” said Andrew Busch, global foreign exchange strategist with BMO Capital Markets.
Busch said that the US has been reluctant to brand China a currency manipulator for two reasons.
“One, China doesn’t meet the Treasury’s narrowly defined criteria. Two, China owns a lot of US Treasury, agency and overall debt securities,” Busch said.
US lawmakers had previously proposed legislation aimed at imposing steep tariffs on Chinese products entering the US if Beijing refused to make its currency flexible.
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