Yellen says US will ‘react strongly’ to any currency manipulation
2024.12.11 13:11
By David Lawder
WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen said on Wednesday that the U.S. will “react strongly” when countries try to manipulate their currencies for competitive advantage, but at the moment there is not such market intervention.
Yellen said in a live interview on Bloomberg Television that she does not see any threat to the dollar’s reserve currency status, as no other currency can rival its global use in financial markets, trade and other transactions.
Asked about the potential for the Trump administration to try to weaken the dollar’s value through a new version of the 1985 Plaza Accord, Yellen said that the Biden administration believes it’s best for markets to determine the dollar’s value.
“We are not approving of countries that attempt to manipulate their own currencies to try to gain a competitive advantage and we’re very attentive and react strongly when we see countries manipulating their currencies to try to retain an advantage.”
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 counteract potentially higher tariffs after President-elect Donald Trump takes office. Trump has vowed to impose tariffs of at least 60% on all imports from China.
The Treasury’s latest semi-annual currency report found no manipulation from major trading partners, but kept China on a monitoring list because of its large trade surplus with the U.S. and a lack of transparency surrounding its foreign exchange practices. These included a slight decline in China’s global current account balance despite higher export volumes, indicating lower export prices.
At the height of the U.S.-China trade war during Trump’s first term in August 2019, Trump directed then-Treasury Secretary Steven Mnuchin to label China a currency manipulator.
But the move was largely viewed as a negotiating tactic, as the Treasury Department dropped the designation in January 2020 as 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 U.S. Senate, would oversee the next currency report in April 2025.
Yellen, who spent two years trying to rebuild frayed U.S. economic relations with Beijing, said that it was critical for the U.S. to maintain ongoing communications with Chinese officials at every level, to foster discussions on policy disagreements and areas of common interest, such as climate, pandemics and financial stability.
“It’s critical to have open channels of communication. It helps avoid misunderstandings,” Yellen said. “We’ve used these channels when we’ve taken action like export controls, or our recent outbound investment restrictions, to explain what we’re trying to accomplish, to avoid misunderstandings that can worsen the relationship needlessly.”
