The Treasury, in its semi-annual currency report to Congress released in Washington today, also targeted “countries with large and persistent surpluses” in the euro area, which “need to take action to boost domestic demand growth and shrink their surpluses.” Germany has “maintained a large current-account surplus throughout the euro-area financial crisis, and in 2012, Germany’s nominal current-account surplus was larger than that of China,” the Treasury said.
The U.S. criticism comes less than a month after a political logjam in Washington drove the world’s largest economy close to a default, led to a partial government shutdown and triggered criticism from officials from China to Europe, who pointed to it as single largest threat to global economic growth.
The yuan “is appreciating, but not as fast or by as much as needed,” the department said in the report.
“The evidence that China has resumed large-scale purchases of foreign exchange this year, despite having accumulated reserves that are more than sufficient by any measure, is suggestive of actions that are impeding market determination and a currency that is significantly undervalued,” the Treasury said.
“It looks like a bad case of the pot contemplating criticism of the kettle,” Kit Juckes, global strategist at Societe Generale SA in London, wrote in an e-mail. “Fed policy has delivered a number of overvalued currencies and a smattering of asset bubbles around the world. The Chinese pay more at Starbucks for coffee but the U.S. would like a weaker dollar.”
The yuan fell for a fourth day today, the longest losing streak since July, as the central bank cut the currency’s reference rate amid a rally in the dollar. The People’s Bank of China cut its fixing, which limits the yuan’s daily moves to 1 percent on either side, by 0.06 percent to 6.1412 per dollar, the weakest since Oct. 17.
On Japan, the Treasury said it will “closely monitor” the government’s policies “and the extent to which they support the growth of domestic demand.”
The Treasury said it will urge South Korea to limit its foreign-exchange interventions “to the exceptional circumstances of disorderly market conditions and to commit to transparency with respect to foreign exchange intervention.”