America officially categorised China as a currency manipulator for the first time in 25 years, after the yuan weakened past the psychologically significant mark of seven to the dollar, the lowest point for the Chinese currency since the financial crisis. The yuan trades narrowly in China around an exchange rate set by the central bank. It dismissed the idea that the yuan had been manipulated, submitting that its depreciation was caused instead by “shifts in market dynamics”, which include “escalating trade frictions”.
Those trade frictions had indeed escalated when Donald Trump earlier announced 10% tariffs on an additional $300bn-worth of Chinese goods in the two countries’ trade war. Mr Trump said he was punishing China for not keeping its promise to buy more American agricultural goods, among other things.
Stockmarkets had a rocky week, with the s&p 500, Dow Jones Industrial Average and nasdaq indices recording their worst trading day of the year so far. Most Asian currencies tumbled following the yuan’s depreciation. But the yen, considered to be a haven in uncertain times, soared against the dollar. The yields on government bonds, another safe bet, fell as investors ploughed into the market.
Investors were also unnerved by a wave of larger-than-expected interest-rate cuts. India’s central bank shaved 0.35 of a percentage point off its main rate, to 5.4%; New Zealand’s slashed its benchmark rate from 1.5% to 1%; and Thailand’s first cut in four years left its main rate at 1.5%. All three were pessimistic about the prospects for growth.
A trade dispute caused sales of cars made in Japan to plunge in South Korea last month. Samsung, South Korea’s biggest maker of smartphones and memory chips, said it was searching for substitute suppliers of some essential chemicals that Japan has tightened its grip on, which South Korea calls an embargo. This week Japan approved its first shipment of high-tech material to South Korea in a month. The row was sparked by a political spat.
The EU selected Kristalina Georgieva as its candidate to head the IMF, but only after the rancorous exercise concluded with some telephone diplomacy. Ms Georgieva is currently the second-highest official at the World Bank. Under an informal convention, Europe gets to pick the managing director of the IMF (and America the president of the World Bank), so Ms Georgieva is favoured to get the job in October, when the IMF will choose its leader. But it must first change a rule that says a new managing director must be under 65. Ms Georgieva turns 66 on August 13th.