What is currency manipulation?


Currency manipulation refers to actions taken by governments to change the value of their currencies relative to other currencies in order to bring about some desirable objective.

The typical claim - often doubtful - is that countries manipulate their currencies in order to make their exports effectively cheaper on the world market and in turn make imports more expensive.

The term has a pejorative connotation, and is often used inconsistently; every country takes actions periodically to manage the value of its own currency, including those countries that routinely accuse others of manipulation.


Currency manipulation is a term that is often used in the political discourse of countries with substantial trade deficits. The United States even goes so far as to produce a biannual report identifying which countries are "currency manipulators".

Rather bizarrely, the most recent report included Germany on the watch list, even though it does not have its own currency to manipulate - it uses the euro. Also, it is possible that the state of Washington in the US would have qualified as a currency manipulator based on the criteria used in the report.

Politicians and citizens prefer to blame trade deficits on the nefarious actions of foreigners, rather than blaming themselves for saving very little of their income and running a massive government budget deficit. If a country consumes more goods/services than it produces, the difference must be imported from somewhere.


US President Donald Trump provides a wealth of quotes, frequently contradictory, on currency manipulation. For example, as reported by Reuters in February: "President Donald Trump declared China the 'grand champions' of currency manipulation on Thursday, just hours after his new Treasury Secretary pledged a more methodical approach to analysing Beijing's foreign exchange practices."

•Robert Kimmel is Associate Professor and head of the Department of Finance at National University of Singapore (NUS) Business School. The opinions expressed are those of the writer and do not represent the views of NUS.

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A version of this article appeared in the print edition of The Sunday Times on July 02, 2017, with the headline What is currency manipulation?. Subscribe