Donald Trump stokes fears of Russia, China currency war

He's accused them of devaluing their currencies.
He's accused them of devaluing their currencies. Photo credit: Getty

US President Donald Trump has accused Russia and China of devaluing their currencies while the United States raises interest rates.

"Russia and China are playing the Currency Devaluation game as the US keeps raising interest rates. Not acceptable!" Mr Trump said in a Twitter post on Monday (local time).

Mr Trump's tweet referred to what he sees as unfair trading advantages - if a country's currency is artificially low, its exports are more competitive. Higher US interest rates would generally increase the value of the US dollar, making US exports more expensive.

Since Mr Trump took office in January 2017, the US dollar has weakened substantially against most currencies, including the Chinese yuan and, until the US imposed sanctions on Russia in the past few weeks, the rouble.

Against the yuan, the US dollar has fallen by 8.6 percent since January 20, 2017, while it has appreciated 4.5 percent against the rouble. Until the US announced sanctions on Russian oligarchs earlier this month, however, the US dollar had weakened by nearly 4 percent against the Russian currency. That gain was entirely erased by a two-day drop of 8.4 percent in the rouble on April 9 and 10.

More widely, the US dollar index, which measures the greenback's value against a basket of major trading partner currencies, has declined by 11.2 percent since Mr Trump became president.

The US Treasury, in a semi-annual report on Friday (local time), again refrained from naming any major trading partners as currency manipulators. The report came as the Trump administration pursues potential tariffs, negotiations and other restrictions to try to cut a massive trade deficit with China.

The report did not mention Mr Trump's recent threats to impose billions of dollars worth of tariffs on Chinese goods over Beijing's intellectual property practices, or pending Treasury restrictions on Chinese investment in the United States.