iFund- US labels China a currency manipulator

2019-08-07 03:51
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The Treasury expects to work with the IMF to eliminate the unfair competitive advantage created by China's latest actions.


Yuan hits lowest level since 2018. Now 1 USD buys more than 7 Yuan. US Treasury names China as a currency manipulator thereafter. The Treasury expects to work with the IMF to eliminate the unfair competitive advantage created by China’s latest actions.

Definition of currency manipulator

A country needs to meet the following three criteria to be a currency : (1) a significant bilateral trade surplus with the United States is one that is at least $20 billion; (2) a material current account surplus is one that is at least 3 percent of GDP; and (3) persistent, one-sided intervention occurs when net purchases of foreign currency are conducted repeatedly and total at least 2 percent of an economy’s GDP over a 12 month period. If only two of these criteria are met, the US will add the countries on its currency monitoring list. The current monitoring list includes but not limited to Japan, Germany and South Korea.

The hint from the PoBC’s Governor

US Dollar to Chinese Yaun Exchange Rate Breaches 7, the important key level. It surprises the markets. However, in June, Yi Gang, the governor of the People’s Bank of China said that no specific level for the yuan is important. It is generally interpreted as the Chinese central bank allowing to breach 7.

Gold breaks through $1400/oz

Affected by the warming of trade, global stock markets fell sharply, and US stocks were not spared. The Dow Jones index fell 767 points to 25.717.74 points, down 2.9%; the S&P 500 index fell 3% to 2,844.74 points. The price of safe-haven assets rose sharply, and the price broke out above the level of $1400/oz. Investor could add gold into their investment portfolios in order to diversify risks.

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