US brands China a currency manipulator for weakening yuan

Business | 6 Aug 2019 11:18 am

The Sino-US trade war boiled over as Washington accused Beijing of manipulating its currency after China let the yuan drop to its lowest point in more than a decade, Reuters reports.

The U.S. Treasury Department announced late on Monday that it had determined for the first time since 1994 that China was manipulating its currency, knocking the U.S. dollar .

The designation by U.S. Treasury Secretary Steven Mnuchin starts a formal process of bilateral negotiations between the world’s two largest economies, and fulfills a promise made by U.S. President Donald Trump on his first day in office.

“As a result of this determination, Secretary Mnuchin will engage with the International Monetary Fund to eliminate the unfair competitive advantage created by China’s latest actions,” the Treasury Department said.

The IMF had no immediate comment. Last month, the global lender said China’s yuan was broadly in line with economic fundamentals, while the U.S. dollar was overvalued by 6 percent to 12 percent.

The Treasury statement, made after the stock trading session ended, sent S&P 500 futures EScv1 down more than 1 percent, suggesting investors expect Wall Street to open on Tuesday with additional losses following Monday's drop of 3 percent on the S&P 500.

The U.S. action came after China let its currency weaken by 1.4 perent, sending it past the key 7-per-dollar level for the first time in more than a decade. Beijing also halted U.S. agricultural purchases, inflaming a trade war that has roiled financial markets, disrupted supply chains and slowed global growth.

Even before the formal designation, Trump on Monday accused Beijing on Twitter of manipulating its currency.

“China dropped the price of their currency to an almost a historic low. It’s called ‘currency manipulation.’ Are you listening Federal Reserve? This is a major violation which will greatly weaken China over time!” Trump tweeted.

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