David Lawder
WASHINGTON (Reuters) – U.S. Treasury Secretary Janet Yellen said on Wednesday that the United States will “strongly respond” when countries try to manipulate their currencies to gain a competitive advantage, but there is no such market intervention at the moment.
Yellen said in a live interview on Bloomberg Television that she sees no threat to the dollar’s status as a reserve currency because no other currency can compete with its global operate in financial markets, trade and other transactions.
Asked about the possibility of the Trump administration weakening the value of the dollar through a recent version of the 1985 Plaza Accords, Yellen replied that the Biden administration believes it would be best to let markets determine the value of the dollar.
“We do not approve of countries that try to manipulate their currencies to gain a competitive advantage, so we are very vigilant and respond strongly when we see countries manipulating their currencies in an attempt to maintain an advantage.”
WEAKER YUAN?
Yellen’s comments did not refer to any specific 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 tariffs once President-elect Donald Trump takes office. Trump announced the imposition of tariffs of at least 60% on all imports from China.
The Treasury’s latest semi-annual currency report found no manipulation by major trading partners, but put China on a monitoring list due to its huge trade surplus with the U.S. and lack of transparency on currency 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 US-China trade war during Trump’s first term in August 2019, Trump ordered then-Treasury Secretary Steven Mnuchin to label China a currency manipulator.
However, the move was largely seen as a negotiating tactic, as the Treasury Department withdrew from the nomination 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 U.S. Senate, will oversee the next currency report in April 2025.
Yellen, who has spent two years trying to rebuild frayed U.S. economic relations with Beijing, said it was critical for the United States to maintain ongoing communication with Chinese officials at every level, fostering discussions on policy differences and areas of mutual interest, such as such as climate, pandemics and financial stability.
“Open channels of communication are extremely important. This helps avoid misunderstandings,” Yellen said. “We have used these channels on actions such as export controls or our recent restrictions on outbound investment to clarify what we are trying to achieve and avoid misunderstandings that may unnecessarily worsen the relationship.”
