US declaration of China as currency manipulator roils global financial markets from the Americas to Asia

Global financial markets from the Americas to Asia were roiled by the US Treasury Department’s first move in a quarter of a century to designate China a currency manipulator, after the Chinese central bank let the yuan sink to its lowest level in 11 years in apparent retaliation for US threats of new punitive tariffs on Chinese products.

Asia’s stock markets fell across the region for the second day, taking the cue from a 2.9 per cent plunge overnight in the Dow Jones Industrial Average, its biggest one-day decline since Christmas Eve last year.

Stock markets fell from Seoul to Wellington, while Asian currencies weakened. The yuan see-sawed in early-hour trading in the offshore markets, after China’s central bank set the onshore renminbi’s daily fixing at a weaker rate for the fourth day in a row.

Treasury Secretary Steven Mnuchin, “under the auspices of President Trump, has today determined that China is a Currency Manipulator”, the department said in a statement after the markets closed, adding that it will work with the International Monetary Fund (IMF) “to eliminate the unfair competitive advantage created by China’s latest actions”.

The Treasury Department justified its actions by citing China’s “concrete steps” in recent days to devalue its currency while maintaining substantial foreign exchange reserves.

“The context of these actions and the implausibility of China’s market stability rationale confirm that the purpose of China’s currency devaluation is to gain an unfair competitive advantage in international trade,” it added in the statement.

China was the last country to be officially designated a currency manipulator by the administration of Bill Clinton in 1994.