By David Lawder
WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen said on Wednesday the U.S. will “respond strongly” when countries try to manipulate their currencies for competitive advantage, but there is no such market intervention at this point.
Yellen said in a live interview on Bloomberg Television that she sees no threat to the dollar’s reserve currency status as no other currency can rival its global use in financial markets, trading and other transactions.
Asked about the possibilities for the Trump administration to try to weaken the value of the dollar through a new version of the 1985 Plaza Accord, Yellen said the Biden administration believes it is best for markets to determine the value of the dollar.
“We do not condone countries trying to manipulate their own currencies to gain a competitive advantage. We are very observant and respond strongly when we see countries manipulating their currencies to maintain an advantage.”
WEAKER YUAN?
Yellen’s comments were not specific to any particular country. But they came shortly after Reuters exclusively reported that Chinese authorities are considering allowing the yuan to weaken in 2025 to counter potentially higher rates after newly elected President Donald Trump comes to power. Trump has promised to impose tariffs of at least 60% on all imports from China.
The Treasury Department’s latest biannual currency report shows no manipulation by major trading partners, but China is on a monitoring list due to its large trade surplus with the US and a lack of transparency around its currency practices. These include a slight decline in China’s global current account balance, despite higher export volumes, indicating lower export prices.
At the height of the US-China trade war during Trump’s first term in August 2019, Trump instructed then-Treasury Secretary Steven Mnuchin to label China a currency manipulator.
But the move was largely seen as a negotiating tactic, as the Treasury Department dropped the designation in January 2020 when Chinese officials arrived in Washington to sign a trade deal with Trump.
Trump’s pick for Treasury secretary, hedge fund manager Scott Bessent, if confirmed by the US Senate, would oversee the next currency report in April 2025.
Yellen, who has spent two years trying to rebuild frayed U.S. economic ties with Beijing, said it is critical for the U.S. to maintain ongoing communication with Chinese officials at all levels to facilitate discussions on policy differences and areas of common ground. interests, such as climate. , pandemics and financial stability.
“It is crucial to have open communication channels. It helps avoid misunderstandings,” Yellen said. “We have used these channels when we have taken action, such as export controls or our recent restrictions on outward investment, to explain what we are trying to achieve, to avoid misunderstandings that could unnecessarily deteriorate the relationship.”
