China (still) not considered a currency manipulator – UOB

Senior Economist Alvin Liew and Senior FX Strategist Peter Chia at UOB Group assessed the publication of the latest US Treasury FX Report.

Key Quotes

“The latest US Treasury FX report did not label any country as a currency manipulator and there were no changes in the criteria to assess currency manipulation”.

“The US Treasury kept the same 6 countries on the Monitoring List which includes China, Japan, (South) Korea, Germany, Switzerland and India (which was the latest addition to the list in the Apr 2018 report) and made no additions despite its previous warning (in Apr 2018) that it was considering “a future expansion in this Report to include more economies.”

“That said, the US Treasury directed most of its commentary and the harshest words in the report towards China (even though it only met one of the three criteria in this Report, a significant bilateral surplus with the US, albeit the largest surplus), putting it at the top position among the countries on the Monitoring List to be most likely labeled as a currency manipulator if the Treasury chooses to do so in the next report”.

“Markets will likely refocus its attention back to US-China trade uncertainties and mid-term elections on 6 Nov. We maintain our view of gradual CNY weakness towards 6.95 by end-2018, 7.00 in 1Q19 and 7.10 in both 2Q and 3Q19”.