In a recent statement, White House economist Jared Bernstein claimed that there is “some evidence” suggesting China aims to weaken the US dollar.
According to Bernstein, China’s efforts are directed toward reducing the dollar’s power as an international reserve currency. The economist urged Congress to address the ongoing debate surrounding the US debt ceiling in order to protect the dollar’s value amidst the campaign by BRICS nations to decrease its influence.
White House thinks the US dollar is under threat
The US dollar has been making headlines over the past few weeks due to the BRICS group of countries, which includes Brazil, Russia, India, China, and South Africa, seeking to eliminate the currency from internal trade.
The White House has stated that China is actively trying to weaken the US dollar. White House economist Jared Bernstein, a member of the White House Council of Economic Advisers, discussed the issue with the Senate Banking Committee, stating that a resolution to the debt ceiling problem could help preserve the value of the greenback.
Bernstein told senators, “One thing we could really do to help both the dollar maintain its reserve currency status, but also to protect the value of the dollar would be to raise the debt ceiling.”
As the world’s second-largest economy, China’s GDP grew 4.5% year-on-year in the first three months of the year, beating analyst forecasts for a 4% expansion as COVID-19 restrictions were lifted.
Retail sales growth in China accelerated to 10.6%, surpassing expectations and reaching a near two-year high. In addition, factory output growth increased but fell slightly short of predictions.
Thierry Wizman, Macquarie’s global FX & rates strategist in New York, said, “When you have the rest of the world doing well or better than the U.S. in terms of activity… that’s usually bad for the dollar.”
Global currency reactions
The US dollar fell against most major currencies on Tuesday, following better-than-expected growth data from China, while strong pay figures from Britain bolstered the pound.
The euro increased 0.37% to $1.0966, while the dollar index, a measure of the greenback against six major currencies, slid 0.372%. China’s offshore yuan experienced a 0.02% drop to $6.8799 per dollar.
Britain’s pound rose despite an unexpected increase in the unemployment rate in the three months to February, as pay growth remained higher than forecast, potentially prompting the Bank of England to raise its interest rate again in May.
