What exactly is currency manipulation?

Question

Could someone please explain this to me in the most basic way possible? Also, how is china manipulating their currency?

Thank you!

Answer 1

A simple way of currency manipulation is the idea of pegging currency.  It is having a fixed currency based on commodities or by other currencies. The Bretton-Woods gold standard is an example of currency manipulation. The currency is based on the amount of gold. The exchange rates were fixed at + or - %.

China pegs the dollar to a fixed amount actually lower. If the dollar increases in value the Yuan increases as well if the dollar decreases the yuan decreases. The Yuan is always going to be lower than the USD. It will be cheaper to invest in China than the US.  China doesn't do this anymore check the CNN source.

Answer 2

ok first when USA needs money to go fight in the Middle east and is already in debt

they issue "bonds or notes" repayable with interest

businesses and other countries buy these notes

also some countries will invest in currency as an investment vehicle

buy when the exchange rate drops, then sell when it increases

so if you have 10 trillion dollars in notes and currency if you go to sell a large amount all at once, then there may be a perception of weakness in the currency and it will drop.

so if you get into a political argument with China, they can say "oh yea"

and sell your currency at a lower value, lowering your currency value

thereby manipulating the value. so it is not valued by unemployment figures, interest rates and gdp

hope this helps