US President Donald Trump on Wednesday accused China and Europe of playing a “big currency-manipulation game.”
He said that the US should match them, a move that would contradict official US policy not to manipulate the US dollar’s value to gain trade advantages.
In a tweet, the president wrote that if the US does not act, it would continue “being the dummies who sit back and politely watch as other countries continue to play their games — as they have for so many years.”
The US Department of the Treasury in May found that no country meets the criteria of being labeled a currency manipulator, although the report did put China and eight other countries on a watch list.
As a presidential candidate in 2016, Trump repeatedly accused China of manipulating its currency and said that as president he would immediately label China a currency manipulator.
However, after taking office, the department has issued five reports on the subject, required by law every six months. In each report it said no country met the criteria to be labeled a currency manipulator.
Trump’s tweet seemed to have no impact on currency markets, a situation that would likely change if US Secretary of the Treasury Steven Mnuchin began threatening to use currency manipulation to drive down the US dollar’s value.
US administrations for decades have pledged in international communiques not to intervene in currency markets for the purpose of influencing trade flows.
A weaker dollar would boost US exports, but could run the risk of causing foreign investors who are helping to finance the government’s US$22 trillion national debt to move their investments elsewhere to avoid the risk of currency depreciation lowering their returns.
The Chinese Ministry of Foreign Affairs yesterday said that China does not engage in competitive currency devaluation.
Ministry spokesman Geng Shuang (耿爽) made the comment at a daily news briefing, reiterating past statements from China.
Separately, Thailand’s central bank is fretting over how to cool the world-beating surge in the baht.
Bank of Thailand officials intensified verbal intervention in the past week, with Senior Director Don Nakornthab saying on Wednesday that the “worried” monetary authority is mulling how the baht can be restrained.
He also flagged the possibility of a cut to interest rates.
The baht has climbed 8.3 percent against the US dollar in the past year, the best performer globally, according to Bloomberg-compiled data.
It is viewed as a safe haven, given Thailand’s history of current-account surpluses and near-record foreign reserves.
The currency’s surge threatens to deepen this year’s sharp slowdown in the export-led economy, but intervention in the foreign-exchange market is not as easy as before because of growing US criticism.
Don said that he did not know what steps to restrain the currency could be rolled out, while adding that one option might be to ask banks to be stricter on short-term transactions by non-residents.
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