A Goldman Sachs sign above the New York Stock Exchange floor. Picture: REUTERS/LUCAS JACKSON
A Goldman Sachs sign above the New York Stock Exchange floor. Picture: REUTERS/LUCAS JACKSON

Goldman Sachs is not ruling out that the US might label China a currency manipulator in a report due next week.

Though China doesn’t meet the three official criteria, the US's treasury department could still accuse the Asian nation if it found that China was manipulating the yuan for trade purposes, Goldman notes. While not the bank’s base case, given that currency matters have played a “central role” in the US-China trade standoff, a formal declaration isn’t unfathomable.

“Naming China a currency manipulator does not seem like the logical next step at this point,” currency strategist Michael Cahill wrote in an October 10 note. “That said, the administration’s continued focus in this area means we cannot rule it out.”

The yuan has slid more than 10% against the dollar in the last six months, raising speculation that China is deliberately weakening its currency as tensions with the US escalate. The drop has drawn the ire of US President Donald Trump, who accused China and the European Union of manipulating their currencies in a July tweet, saying they were “taking away our big competitive edge.”

A treasury spokesperson did not immediately respond to requests for comment on the Goldman report. A senior treasury official said on Monday that the US was concerned about the yuan’s recent depreciation, while treasury secretary Steven Mnuchin told the Financial Times that the US is monitoring currency issues “very carefully”.

Goldman says the more likely scenario would be that Treasury keeps China on the monitoring list, but refrains from a formal accusation. While foreign exchange will remain a central part of trade discussions, Chinese policy makers have taken steps to stabilise the yuan since Trump’s July tweet, Cahill wrote.

With Liz Capo McCormick.

Bloomberg