Currency manipulation warning sparks debate on Trump’s plans

Donald Trump’s first day in office has whipsawed global markets, with traders zeroing in on a warning over currency manipulation which may spark greater volatility ahead.

A fact sheet from the new US administration that is yet to be made public has called for key federal agencies to address foreign-exchange manipulation by other countries, prompting strategists to ponder who will be targeted. Japan, China, Germany and Singapore are already on the US Treasury Department’s “monitoring list” for currency practices.

“That’s a ground-breaking newsworthy item for currencies,” said Richard Franulovich, head of foreign-exchange strategy at Westpac Banking Corp. Trump and Treasury Secretary nominee Scott Bessent may “apply more judgment and discretion, meaning more trading partners are labeled as manipulators.”

Trump’s move comes after high US interest rates and strong growth have kept the dollar elevated against everything from the euro to the yuan, entrenching its dominance across the $7.5 trillion-a-day foreign-exchange market. The prospect of further gains in the greenback is likely to put other nations on guard and may fuel another round of intervention to prop up their currencies.

China, which is already in the cross-hairs for trade tariffs from the US, may be particularly vulnerable, strategists said. Any new headlines on currency practices could further hurt the yuan.

“Increased US scrutiny on currency policies could pressure countries to allow more FX appreciation against the dollar,” said Wei Liang Chang, a strategist with DBS Bank Ltd. “If there are perceptions of allowing the currencies to weaken in the event of US tariffs in future, then this could raise the currency manipulation question again.”

Washington’s fact sheet is stirring memories of an earlier plan by Trump and his economic advisers that was aimed at actively stopping nations from shifting away from using the dollar. The measures in question included export controls, currency manipulation charges and levies, Bloomberg News reported in April.

“This fact sheet mentioned by Trump may seem new but is likely similar to the existing one, perhaps with greater emphasis on ‘manipulators’,” said Christopher Wong, strategist at Oversea-Chinese Banking Corp. “If there is more added to the list, then likely there could be some volatility around it.”