US labels China `currency manipulator’ as yuan sinks to a decade low
06 Aug 2019
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The United States on Monday formally labelled China as a “currency manipulator” after Beijing let the yuan breach the key 7 per dollar level for the first time in more than a decade.
Treasury Secretary Steven Mnuchin announced the decision, a largely symbolic measure that is likely to deepen the growing animosity between the two trading partners, late in the day, sending stock markets into a tizzy and threatening to inflict significant damage on a weakening global economy.
The move to label China a “currency manipulator” requires the US Treasury to initiate consultations with China as Beijing has long denied US accusations that it keeps its currency undervalued to make its products more competitive on world markets.
Markets, however, see the yuan’s fall as proof of China's willingness to let the yuan slide in response to the latest US tariff threat.
US President Donald Trump vowed last week to impose 10 per cent tariffs on the remaining $300 billion of Chinese imports from 1 September.
Safe-haven assets, including the Japanese yen, government bonds and gold, rallied as investors cut back on riskier assets.
The Treasury's announcement came shortly before 6 pm, after China allowed its tightly controlled currency to slide to an 11-year low against the dollar, and caused a nearly 1,000 point drop in the Dow Jones industrial average.
On Wall Street, the Dow fell more than 767 points, or nearly 3 per cent, and Treasury yields plunged to their lowest mark in almost three years.
Against the Japanese yen, the US dollar fell 0.56 per cent to its lowest level since the January crash.
Emerging market currencies also took a beating with the emerging market currency index falling 1.25 per cent to this year’s low.
MSCI's All Country World Index, which tracks shares in 47 countries, extended last week's slide to dip 2.4 per cent, to a two-month low.
The pan-European STOXX 600 index closed down 2.31 per cent. Factoring in Friday's losses, the index marked its largest two-day decline in over three years.
Worries about a slowdown in global growth due to an extended trade conflict also hurt oil prices.
On the commodity markets, Brent crude futures were down $1.87, or 3.02 per cent, to $60.02 per barrel, while US West Texas Intermediate (WTI) crude futures were down 0.71 cents, or 1.28 per cent, to $54.95 a barrel.
Gold rose to a more than six-year high. Spot gold was up 1.68 per cent at $1,464.60 per ounce.
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