By David Lawder
WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen said on Wednesday that the U.S. will “respond strongly” when countries try to manipulate their currencies for competitive advantage, but for now it is not there is market intervention.
Yellen said in a live interview on Bloomberg Television that she does not see any threat to the reserve currency status of the dollar, as no other currency can be against its global use in financial markets, trade and other transactions.
Asked about the possibility of the Trump administration trying to weaken the value of the dollar through a new version of the 1985 Plaza Agreement, Yellen said that the Biden administration believes that it is better for the markets to determine the value of the dollar.
“We do not allow countries that try to manipulate their own currency to try to gain a competitive advantage and we are very alert and react strongly when we see countries manipulating their their funds to try to maintain an advantage. “
A weaker YUAN?
Yellen's comments were not specific to any particular country. But they came shortly after Reuters reported exclusively that Chinese authorities are considering allowing the yuan to weaken in 2025 to counter possible higher tariffs after President-elect Donald Trump Trump to take office. Trump has promised to impose tariffs of at least 60% on all imports from China.
The Treasury Department's latest semi-annual currency report found no manipulation by major trading partners, but kept China on a watch list because of its trade surplus with the US and lack of transparency regarding its foreign exchange practices. These included a slight decline in China's global current account balance despite higher export volumes, reflecting lower export prices.
At the height of the US-China trade war during Trump's first term in August 2019, Trump ordered then-Treasury Secretary Steven Mnuchin to designate China as a currency manipulator.
But the move was largely seen as a negotiating tactic, as the Treasury dropped the designation in January 2020 when Chinese officials arrived in Washington to sign a trade deal with Trump.
Trump's choice for Treasury Secretary, hedge fund manager Scott Bessent, if confirmed by the US Senate, would oversee the next money report in April 2025.
Yellen, who has spent two years trying to rebuild US economic relations with Beijing, said it was vital for the US to maintain ongoing dialogue with Chinese officials at all levels, to encourage discussions about policy disagreements and areas of general interest, such as climate. , pandemics and financial stability.
“It's essential to have open lines of communication. It helps avoid misunderstandings,” Yellen said. “We have used these channels when we have taken action such as export controls, or our recent external investment restrictions, to explain what we are trying to achieve, to avoid misunderstandings to avoid that could make the relationship worse.”
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