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As of May 2017, China has ap- parently unofficially pegged the yuan to the U.S. dollar, which has driven down expectations of volatility to a two-year low. Yet experts warn that a resurgent dollar could do serious damage to China’s economy.
advice of economists who noted that Chi- na has not manipulated its currency since mid-2014, when it began selling off cur- rency from its reserves. This about-face is just one example of the issues that experts face when predicting the future of inter- national currency exchanges in the age of Trump. They also underscore the geo- political ramifications of what was once a purely economic calculation.
Surprisingly enough, Trump’s biggest
tional currency markets thus far has nothing to do with Chi- na. Instead, the president has pointed his finger at Germany. According to CLS Bank International, the biggest foreign ex- change services company in the world, currency volumes were most affected by politics on January 31, 2017. That day saw a US$215 billion deviation from the 2016 average because U.S. trade advisor Peter Navarro claimed that Germany utilized a “grossly undervalued” euro to its own advantage. German Chancellor Angela Merkel responded that as a part of the eu- rozone, Germany does not have the ability to manipulate the euro. In April the U.S. Treasury put Germany on its watch list—stopping short of naming it a currency manipulator.
Germany’s case may attract some at- tention over the coming months. In the assessment of the U.S. Treasury, Germa- ny benefits from a euro weakened by eco- nomic crisis in Greece. While wages and environmental standards in Germany re- main high, the currency remains low, re- sulting in a hefty trade surplus with the United States (around US$65 billion).
A COOLING OF TENSIONS
Official voices predict a general cooling in the currency manip- ulation climate for the next few years. According to analyses of the most recent G20 meeting, even longtime currency manip- ulators have agreed to allow the situation to stabilize for the time being. In recent months, the Bank of Japan and the ECB have begun easing off intervention and letting the market price settle, albeit gradually. So it seems that while many countries remain skeptical of extended cooperation, short-term competi- tion may not be as cutthroat as it has been in recent years. Yet in these uncertain times, no one knows just how long this cool- ing will last until economic or geopolitical pressures pit finance ministers against each other once again.
impact on interna-
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