US President Barack Obama’s administration on Monday said that China’s currency remains undervalued in relation to the US dollar, but it did not cite the nation for unfairly manipulating its currency to gain trade advantages.
In a new US Department of the Treasury report, the administration said that China sent global markets plunging in August with a surprise devaluation of the yuan. Since then, China’s currency, has fallen 2.3 percent against the US dollar.
The Treasury said it would be important going forward for China to allow its currency to again rise in value against the US dollar when market forces dictate such a move.
The report, which the Treasury is required by law to submit to the US Congress twice a year, did not charge any nation with unfair currency manipulation.
The latest report stood in contrast to the previous report in April and several before that, in which the administration said it believed that China’s currency was “significantly undervalued.”
In the new report, the administration softened its language to say that China’s currency “remains below its appropriate medium-term valuation.”
In an interview before the report was released, US Department of the Treasury Secretary Jacob Lew said that there was still room for China’s currency to appreciate once the nation gets past some of its immediate economic problems.
“Right now there is downward pressure on the [yuan], some of it as a result of the policies [China] made and the way they announced them over the summer,” Lew said in an interview with CNBC.
The report also said that South Korea’s currency, the won, is undervalued, falling by 7.7 percent over the past year against the US dollar.
The report repeated a past recommendation that the South Korean government limit its intervention in currency markets to periods when trading was disorderly.
It said South Korea also needs to be more transparent in telling financial markets when it was intervening.
The report said that global growth has been modest so far this year, with activity in European nations that use the euro currency “highly uneven and too soft overall.”
It cited high unemployment in Spain and Greece, and large current account trade surpluses in nation such as Germany.
The report said nations with large current account surpluses should take strong action to boost investment and domestic demand.
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