China not currency manipulator, US dollar too strong, says Trump in major flip-flop on campaign vow
President Donald Trump said he will not brand China a currency manipulator, abandoning a core promise of his election platform that tapped into voter anger about trade-driven job losses.
Trump, speaking in an interview with the Wall Street Journal on Wednesday, said China hasn’t manipulated its currency for months, and added that the US dollar is getting too strong.
While Trump vowed on the campaign trail to label China a currency manipulator on his first day in office, he didn’t do it, and Treasury Secretary Steven Mnuchin has said the official assessment will come in a semi-annual foreign-currency report due this month.
“They’re not currency manipulators,“ Trump said, according to the Wall Street Journal.
Failure to officially name China a currency manipulator would be the latest indication Trump may tone down trade-related campaign threats, often directly aimed at China. The Treasury report is the government’s formal channel to impose the manipulator designation, leading to negotiations for a solution and penalties if the practise continues.
US 10-year bond yields slumped and the dollar fell after Trump indicated in the interview that the US currency is getting so strong that it’s harmful to the economy.
“I think our dollar is getting too strong, and partially that’s my fault because people have confidence in me. But that’s hurting -- that will hurt ultimately,” he told the newspaper. “It’s very, very hard to compete when you have a strong dollar and other countries are devaluing their currency.”
The dollar fell broadly on Wednesday after Trump said the dollar was “getting too strong” and that he would prefer that the Federal Reserve keep interest rates low.
Trump also left open the possibility of renominating Federal Reserve Chair Janet Yellen when her term expires next year.
The dollar index, which tracks the US currency against six major rivals, fell to its lowest since March 30 after the news.
“The market had a big reaction, but I think it was an overreaction,” said Kathy Lien, managing director at BK Asset Management in New York. “He may just be hedging his bets by making sure that the American public realises he’s not backing down on trade.”
Lien also said she expected Trump’s comments could weigh on the dollar in the long term. It has fallen every day this week as worries over geopolitical tensions have prompted investors into safe havens like the yen, US Treasuries and gold.
“The dollar’s already under pressure, so I think any excuse for further pressure is likely to bring the greenback even lower,” Lien said.