from formally labeling China a currency manipulator at the end of May — anything is on the table, according to Canadian Imperial Bank of Commerce.“The obsession with currency manipulation — a month after the last Treasury report had different conclusions — means we should be prepared for anything,” said Bipan Rai, CIBC’s North American head of foreign-exchange strategy.
The euro touched the day’s high on Trump’s tweet Wednesday before retreating. The latest missive did little to rattle the offshore yuan, which is roughly unchanged near 6.88 per dollar. The Bloomberg Dollar Spot Index is down about 0.5% this year, after a 3.2% gain in 2018. But using a Federal Reserve trade-weighted measure, the dollar is not far below the strongest since 2002, which threatens to make U.S. exports less competitive abroad.
The risk of intervention increases should the Fed decide not to ease policy at its meeting this month, Rai said. Trump has staged a campaign against Fed Chairman Jerome Powell in recent months, comparing the central bank to a “Trump may ramp up his jawboning efforts as other major central banks start to ease, said Anthony Doyle, global cross-asset investment specialist at Fidelity International.
“I wouldn’t be surprised if jawboning was to increase in coming months,” Doyle said in an interview with Bloomberg Television. “Generating inflationary pressures, generating competitiveness through a lower currency is one tool that central banks can use to support their economies and it’s the only game in town at the moment.
“However, the problem arises if U.S. economic outperformance continues and the dollar proves accordingly resilient,” he said. “In that case, the temptation to intervene in FX markets will increase if Fed cuts don’t do the trick.”
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