Wall Street Faces More Tumult If China Is Labeled an FX Manipulator
- Yuan weakness, escalating trade war has banks bracing for move
- Designation likely to fuel further market strife, Goldman says
Wall Street is bracing for the prospect that the U.S. uses this month’s semiannual foreign-exchange report to label China a currency manipulator, escalating the trade standoff between the two nations at a time when rising bond yields are already denting riskier assets.
The scenario is viewed as possible -- though not probable -- given the yuan has tumbled more than 9 percent against the dollar over the past six months, raising speculation that China has been deliberately weakening the currency. The U.S. is concerned about the depreciation, and wants to make sure it’s not being used as a competitive devaluation, Treasury Secretary Steven Mnuchin said in an interview in Bali Thursday. If the White House formally imposes the designation on China, that would be the first time since 1994.