May 13, 2024

Washington May Have Strong Reaction to Chinese Devaluing Yuan

Recently, in an article in Newsweek, Vincent Deluard, Director of Global Macro Strategy, shared his insight on how Washington may respond if Beijing devalued their own currency for the first time since 2015.

"I think the secretary of commerce would make a very strongly worded statement about the trade deficit, currency manipulation, and protecting American jobs from unfair competition from China,” says Deluard.

"And (Treasury Secretary Janet) Yellen and (Federal Reserve Chair Jerome) Powell would open up a bottle of Champagne as a Chinese devaluation would solve, at least temporarily, their inflation problem just in time for the election," he added.

The speculation regarding China potentially devaluing the yuan, what many consider a ‘nuclear option,’ emerges from The People’s Bank of China continuously adding to its gold reserves, in addition to other commodities. These commodities could function as a hedge if Beijing decides to devalue its currency.

Deluard believes that Washington would respond harshly to any blatant currency manipulation, as it would lower the price of Chinese products and apply pressure to US corporations.

Amid all the uncertainty, the Federal Reserve decided to again postpone slashing interest rates until it had more confidence that price growth was slowing down. Most Americans are viewing inflation as a hot button issue leading up to the election in November. 

14-Day Free Trial Available: Access Vincent Deluard’s Global Macro Insights

Global Macro Insights is a suite of reports providing big-picture commentary and analysis of the socio-economic and political trends and dynamics that move markets globally, written by well-known StoneX commentator Vincent Deluard.

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