This from the US Treasury twice yearly currency manipulation report
- Found that no major US trading partner manipulated currency to gain unfair trade advantage in four quarters through December 2023
- Found no major trading partner met criteria for enhanced analysis in four quarters ending December 2023
- Monitoring list of trading partners whose currency practices 'merit close attention' includes China, Japan, Malaysia, Singapore, Taiwan, Vietnam, and Germany
- Foreign exchange report reiterates call for increased currency transparency from China
- China's failure to publish forex intervention and lack of exchange rate policy transparency make China an 'outlier,' warrant close monitoring
- Biden administration strongly opposes attempts by trading partners to manipulate currency values to gain unfair advantage over US workers
- Japan intervened in currency market in April and May 2024 to buy yen, sell dollars, strengthening yen's value
- Japan is transparent on foreign exchange interventions
- Expects intervention in large markets to be reserved for very exceptional circumstances with appropriate prior consultations
- China has used daily yuan fix rate over the past year to prevent weakening of yuan, without official explanation
- Japan, Taiwan, Vietnam, Germany on monitoring list due to significant bilateral US trade surplus and material global current account surplus
- Japan's recent currency market interventions were not a factor in adding Japan to forex report monitoring list
- Forex report raises questions on the accuracy of Chinese data on current account balance
The comments on China are interesting but there is nothing new there. China manages its currency. If you are not familiar with the Asia time zone, every day I post where the People's Bank of China sets its CNY reference rate. Traders are permitted to trade USD/CNY only within a +/- 2% band from the reference rate. If USD/CNY moves outside of this band the PBoC will intervene to bring it back within the band. CNY is the 'onshore' yuan. There is also CNH, the offshore yuan. There are no limits applied to this. Its free to move outside +/- 2%, and it does, but it never strays too far from USD/CNY.
As for how the PBoC sets the reference rate each day, this is where there is no transparency. They have a "counter-cyclical factor" they apply to the rate to set it each day. This was first used in 2017 and continues to this day. The PBoC has not disclosed what the factor is, how its calculated etc. Officials say its used as a way to reflect fundamental supply and demand, and lessen the effect of herd mentality in the currency market (ps. you and I are part of their herd, moo).
Only this week the PBoC has made some sort of adjustment, they've been allowing the USD/CNY reference rate to, fairly quickly, drift higher. That is, allowing the CNY to weaken. I posted a heads up to this policy nudge coming from the Bank back on Monday:
USD/CNH update:
