Currency-Manipulating China Gives Trump What He Wants — A Cheap Dollar

President Donald Trump is finally getting what he wants — from those currency manipulators in China.

During his campaign last year, Trump railed against China for devaluing its currency, on the assumption that the country’s leaders wanted to make it easier for their domestic exporters to sell cheap goods abroad — at the expense of competing U.S. manufacturers.

In April, following a visit by Chinese President Xi Jinping to Trump’s estate in Palm Beach, Fla., Trump backtracked and acknowledged the country wasn’t manipulating the yuan lower.

And since then, the Chinese currency has strengthened about 3% against the dollar, giving U.S. exporters an incremental advantage. What’s more, according to the $59 billion money manager Ashmore Group Plc, the yuan is set to strengthen another 3% to 4% in the year ahead — contrasting with Wall Street forecasts for a decline of as much as 4%.

While China still keeps an iron grip on its exchange rate, 2017 has thus far brought a reversal of a three-year stretch in which the dollar weakened against the yuan, also known as the renminbi or by its trading symbol RMB. Some of the Chinese currency’s strength stems from appreciation in major currencies like the euro and yen against the dollar, putting upward pressure on the yuan on a trade-weighted basis. But the gains versus the dollar show a willingness on the part of China to cede a marginal advantage to the U.S., its biggest single destination for exports.

“We do expect that the RMB should continue to gradually strengthen versus the weakening dollar over the next few years,” said Jan Dehn, head of research at London-based Ashmore, which specializes in emerging-market stocks and bonds.

The exchange-rate reversal comes amid increased tensions between Trump and Xi, who has taken steps to improve his country’s standing as a powerhouse in international trade even as the U.S. president pledges to renegotiate trade deals he considers unfair — in order to protect American manufacturers and workers.

In a series of tweets on July 29, Trump accused China of doing little to rein in North Korea over its recent missile tests. And last week, Trump complained about the U.S. trade deficit with China in a Wall Street Journal interview, according to a leaked transcript published by Politico.

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