US President Donald Trump has accused the Federal Reserve of being responsible for the “very strong” dollar by keeping interest rates high.
“Three more Central Banks cut rates.” Our problem is not China – We are stronger than ever, money is pouring into the U.S. while China is losing companies by the thousands to other countries, and their currency is under siege – Our problem is a Federal Reserve that is too…..
Another way would be for the US to directly sell dollars to buy other currencies, but Ms Greene said that while the US had about $100bn of reserves which it could use to try to devalue its currency, it was not enough to make much of a difference.
“If the US is cruising for a currency war, it doesn’t actually have that many tools to win one,” she added.
So what happens next?
Treasury Secretary Steven Mnuchin will now engage with the International Monetary Fund (IMF) with the intention to “eliminate” what the US describes as “the unfair competitive advantage created by China’s latest actions”.
Ms Greene pointed out that the IMF had previously said China was not manipulating its currency and warned it could be a “dead end”.
It is making economists question what else the US might do, while the president’s tweets are already leading some to expect that the US could start intervening directly.
John Normand, head of cross-asset fundamental strategy at JP Morgan, said he did not think a currency war was under way yet, since the moves in the Chinese currency this week were “private-sector driven” as international investors withdrew funds from the country.
“Before Trump, people would have assumed a currency war wouldn’t happen,” he said, adding that the US president “disregards all conventions”.
What has happened in the past?
Agreements between the main trading nations have pledges not to manipulate currencies, although there have been agreements between nations to intervene in markets.
The 1985 Plaza Accord, for instance, was an agreement under which Japan, France, Germany, the UK and the US agreed to boost the value of the dollar.
Even if direct intervention in the market does not take place, Kate Phylaktis, professor of international finance at the Cass Business School, pointed out that countries can use indirect methods such as capital controls (when governments limit the flow of currencies in their countries) and monetary policy.
Leaders can also try to make public remarks that can have an impact on the value of their currencies. Such “talk” is something Mr Trump has accused the European Central Bank of, when he said in June that the fall in the euro against the dollar was “making it unfairly easier for them to compete against the USA”.
German authorities have charged the former boss of Audi with fraud as part of an investigation into the VW emissions-cheating scandal.
Rupert Stadler is also accused of false certification and criminal advertising practices.
Prosecutors claim he knew that hundreds of thousands of Audi, Porsche and VW cars contained software designed to cheat pollution tests, yet turned a blind eye.
Mr Stadler has denied wrongdoing.
The VW dieselagate scandal erupted in September 2015 when it emerged VW had installed so-called “cheat devices” in 600,000 vehicles sold in the US and millions more globally.
Since then the carmaker, which owns Audi and Porsche, has had to set aside around $30bn to cover fines and settlements.
Former VW boss Martin Winterkorn also has been charged with fraud, while many others remain under investigation.
On Wednesday, the public prosecutor’s office in Munich said that Mr Stadler faced charges over the affair along with three other defendants who were not named.
‘Aware of manipulations’
The prosecutor said his indictment related to roughly 250,000 Audi-branded cars, 112,000 Porsches and 72,000 Volkswagen cars that were sold in the US and Europe.
“Defendant Stadler is accused of having been aware of the manipulations since the end of September 2015 at the latest, but he did not prevent the sale of affected Audi and VW vehicles thereafter,” the prosecutor said.
“Vehicles with the engines concerned were subsequently sold in large numbers and placed on the market.”
Mr Stadler was arrested last June and spent time in custody as part of a wider probe into emissions cheating at Audi. Volkswagen later ended his contract citing the criminal investigation.
On Wednesday, Audi said it was in the interest of the company, its shareholders and employees to clarify the issues that led to the diesel crisis.
But it added: “Until this has happened, the presumption of innocence must prevail.”