Mnuchin Labels Trump's China, Russia FX Tweets a `Warning Shot'

(Bloomberg) -- President Donald Trump’s accusations that China and Russia are gaming their currencies were a “warning shot” about the consequences about devaluation, rather than part of a wish to achieve a weaker dollar, U.S. Treasury Secretary Steven Mnuchin said.

“China has devalued their currency in the past -- as a matter of fact, through 2016 they devalued it significantly and starting in 2017, since the president was elected, they’ve used a lot of their reserves to actually support their currency,” Mnuchin said early Tuesday in a CNBC interview. “The president wants to make sure they don’t change these plans and he’s watching it.”

Asked whether Trump’s tweet on Monday about China and Russia being currency manipulators had to do with wanting a weaker dollar, Mnuchin said: “That’s not the case. It was warning shot at China and Russia about devaluation.”

Just three days after the Treasury Department issued a report saying that no major trading partner was manipulating their currency, Trump tweeted that Russia and China -- with whom geopolitical tensions are high -- are “playing the currency devaluation game as the U.S. keeps raising interest rates.” He called the move “Not acceptable!”

China is on the Treasury’s currency watchlist under a twice-yearly report on currency exchange policies.

The attack added fuel to the brewing trade dispute between the U.S. and China and drew swift criticism from Russia, which the White House recently sanctioned and clashed with over Syria. The ruble has dropped about 10 percent against the dollar in the past year, with the most recent plunge a result of U.S. sanctions related to 2016 election meddling.

After a flub in January when Mnuchin made off-the-cuff remarks that a weaker dollar had short-term benefits for the U.S. economy, he has consistently said that his dollar policy is not aimed at talking it down.

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