U.S. Treasury Secretary Steven Mnuchin stopped short of accusing China of purposely depressing its currency, in a newspaper interview published Wednesday, but warned Beijing against engaging in a competitive devaluation of the yuan as the two countries continue to battle each other over trade.
“As we look at trade issues, there is no question that we want to make sure China is not doing competitive devaluations,” Mnuchin said, according to the Financial Times, in an interview ahead of meetings of the Group of 20 nations, International Monetary Fund and World Bank in Bali, Indonesia.
The U.S. dollar USDCNY, -0.0563% rose to more than 6.93 yuan earlier this week. The dollar edged back down 0.1% to 6.919 yuan early Wednesday.
The yuan has dropped nearly 11% from its 2018 peak in March and is trading within striking distance of 7 per dollar, an important psychological level. Economists and analysts have attributed much of the weakness to China’s slowing economy and other factors, arguing against the idea that the government is working to purposely weaken the currency as part of the trade battle with the U.S.
A sharp rise in interbank lending rates in Hong Kong, an offshore trading hub for the yuan, surged Tuesday, possibly reflecting efforts by China’s central bank to prevent the currency from weakening too much, The Wall Street Journal reported.
Mnuchin said the currency had “depreciated significantly” and that U.S. officials looked forward to discussing the “various factors” behind the move. “One of those factors has to do with their own economic issues and what has gone on in the Chinese economy,” he acknowledged.
The Treasury Department is expected to release its semiannual currency report later this month. A Bloomberg report said Mnuchin has faced pressure from the White House to formally designate China a currency manipulator. The Financial Times said Mnuchin refused to talk about the report, except to say he expected it to be published soon and that he didn’t specifically refer to currency manipulation.
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