More from US President Trump, this time on the yuan and manipulation
- China is trying to devalue its currency
- US is studying whether to label China a currency manipulator
- China is not playing with a level playing field with currency
- US is examining 'formula' for currency manipulators
From Bloomberg's interview with President Trump
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I have outlined before the current 'formula' the US Treasury uses in its assessment of currency manipulation.
In a nutshell, for the US to label a country a currency manipulator these 2 criteria have to be met first:
(1) have material global current account surpluses
and (2) have significant bilateral trade surpluses
with the United States
When President Trump says the US is examining the formula, this will be a starting point.
Just IMHO if a country sets an acceptable exchange rate (oh, I dunno, let's call it a reference rate for example) and then permits the currency to trade only within some sort of acceptable range (oh, I dunno, let's say plus or minus 2%) and then says it will interven to stop the currency trading outside that band …. I reckon that might well be manipulation. US Treasury though, have disagreed with me.
Perhaps another example? If a country sets a level on EUR/CHF and actively intervenes in the market to halt it there, I reckon that might be manipulation. US Treasury though, have disagreed with me.
ps. Trump said labelling China a currency manipulator was a 'day 1' promise. Still has not done so.
pps. Countries make various cases for why they are managing their currencies. They may have a point but that is a discussion for another day (at least for me … by all means comments welcome)
