The US is telling its trading partners – do as I say, not as I do
It is not the most enticing reading material: “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.” But this 59-page report, issued last month by the US Treasury Department, reveals much about contemporary America. Remember the joint intervention by Japan and the United States in the international currency market to prop up the yen at the end of July? By…
The US Treasury Department's latest report, titled "Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States," reveals a troubling trend in international currency policies. The report expressly warns that the US is committed to "aggressively and vigilantly monitoring and combating unfair currency practices" and assesses whether trading partners are manipulating their currencies for unfair trade advantages.
China, Japan, Korea, Taiwan, Thailand, Singapore, Vietnam, Germany, Ireland, and Switzerland are all listed as being monitored in the report, with no improvement noted since the January report.
The report sheds light on the recent joint intervention between Japan and the United States in the international currency market to prop up the yen, which ultimately failed. This operation, conducted by the New York Federal Reserve on behalf of the US Treasury, bypassed the European Central Bank, causing the euro to depreciate by over four percent.
The US Treasury Secretary, Scott Bessent, reportedly used euros for the operation, which left European officials feeling blindsided. The intervention caused the yen to rise but resulted in an over four percent devaluation of the euro, raising questions about the trust in the transatlantic relationship.
The report also highlights Washington's questionable behavior in the currency market, including the unexpected joint intervention by the US and Japan. This move, despite being unorthodox, aimed to counter the yen's decline, which was attributed to Japan's Prime Minister Sanae Takaichi's efforts to support the currency. However, the intervention ultimately proved ineffective due to the prevailing market trend, influenced by Takaichi's willingness to borrow and suspend taxes.
Furthermore, the report highlights the US dollar's dwindling credibility as a reserve currency. With the US experiencing rising borrowing costs, the 10-year US Treasuries auction resulted in the highest yield since 2007, while the 30-year Treasuries saw the highest yield since 2001. US Treasury Secretary Bessent's unprecedented intervention to stabilize the dollar by doubling the purchase of long-term government debt raised concerns about the country's commitment to fiscal discipline.
In summary, the US Treasury Department's report paints a picture of the United States attempting to influence other countries' currency policies while simultaneously facing growing doubts about the strength of the US dollar. The report's findings raise questions about the integrity of the US's international trading partners and the potential consequences of the country's actions in the global currency market.
Written by urgent.news from South China Morning Post's reporting — not their text. Machine-written — may contain errors; check the original before relying on it.
