Currency war erupts as Trump blames China, EU for 'manipulating'

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By Katherine Greifeld
Bloomberg News
Friday, July 20, 2018

The currency war has arrived.

So say some of the best and brightest in the $5.1 trillion-per-day foreign-exchange market. U.S. President Donald Trump took to Twitter Friday to accuse China and the European Union of "manipulating their currencies and interest rates lower." The comments came today after the yuan plunged past 6.80 per dollar for the first time in a year and as the nation's central bank shows little sign of intervening to stem the slide.

As the world's two largest economies open up a new front in their increasingly acrimonious game of brinkmanship, the consequences could be dire -- and ripple far beyond the U.S. and Chinese currencies. Everything from equities to oil to emerging-market assets are in danger of becoming collateral damage as Beijing and Washington threaten the current global financial order.

... Dispatch continues below ...



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"The real risk is that we have broad-based unravelling of global trade and currency cooperation, and that is not going to be pretty," said Jens Nordvig, Wall Street's top-ranked currency strategist for five years running before founding Exante Data LLC in 2016. "Trump's rhetoric over the last 24 hours is certainly shifting this from a trade war to a currency war." ...

The Treasury Department declined to comment when asked whether the U.S. was entering a currency war.

The greenback will likely continue to suffer as investors heed Trump and back out of long dollar wagers, according to Shahab Jalinoos, Credit Suisse Group AG's global head of FX trading strategy. Hedge funds and other speculators are the most bullish on the currency in over a year, according to the latest data from the Commodity Futures Trading Commission.

"It has now been virtually defined as a currency war by the U.S. president, given that he explicitly suggested foreign countries are manipulating exchange rates for competitive purposes," Jalinoos said. "The barrage of commentary will likely force the market to scale back long dollar positions."

... For the remainder of the report:

https://www.bloomberg.com/news/articles/2018-07-20/currency-war-erupts-a...

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