The U.S. President Donald J. Trump recently tweeted: “Russia and China are playing the Currency Devaluation game as the U.S. keeps raising interest rates. Not acceptable!”
This tweet has caused an economic confusion without an explanation. Investors interpreted it as desires for a weaker US dollar. The U.S. President Donald J. Trump has accused Russia and China, but he is playing the same game. He tries to influence the investors and traders to devalue USD, which should boost the US exports. In addition, in February he announced that he favors a weaker greenback. Traders have been bearish on the US currency since then.
The only reason Russia is “playing the devaluation game” is because of the sanctions Trump unleashed on Russia last week which sent both the ruble, and Russian assets crashing. If anything, Moscow wants a stronger Ruble to avoid having to raise rates even higher. As for China, while it may want a weaker yuan to boost exports, it will surely come as news to Beijing that it is devaluing the currency, which is trading at the strongest level against the dollar since the August 2015 devaluation, as a result of – drumroll – the weaker dollar. In fact, the weaker the dollar, the stronger the Yuan, according to zerohedge.com
Its interesting to note that both the Ruble and the yuan have appreciated against the greenback in the last two years – how are they playing their devaluation games then?