US labels China a currency manipulator

The US has labelled China a ‘currency manipulator’ exacerbating political and economic tensions between the world’s two largest economies.

In a move that will worsen its relationship with China, the US Department of the Treasury officially labelled the country a ‘currency manipulator’.

The announcement by US Treasury came in the wake of a steep decline in the value of the Chinese yuan against the dollar on Tuesday.

The dollar sits at 7.02961 against yuan as of 12:45 GMT on Tuesday, representing more than a 2% gain over the last two days.

US-China trade tensions worsen

Last week, officials in Beijing said they would respond to US President Donald Trump’s proposal to impose 10% tariffs on around $300 billion (£246.7 billion) worth of Chinese goods.

This week, the yuan breached the $7-dollar level for the first time since 2008, prompting the US Treasury and Trump to accuse China of manipulating its currency.

Learn how to capitalise on currency market volatility with IG.

Chinese exports more affordable as yuan weakens

A weaker yuan puts China is a stronger position in the ongoing trade war with the US by making its exports cheaper and more competitive.

Officials in Beijing deny manipulating the yuan, with the People’s Bank of China (PBOC) blaming the currency’s decline on ‘"unilateralism and trade protectionism measures and the imposition of tariff increases on China’.

In response, the US Treasury Secretary Steven Mnuchin plans to meet with the International Monetary Fund (IMF) ‘to eliminate the unfair competitive advantage created by China's latest actions’.

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