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Currency manipulation is a policy used by governments and central banks of some of America’s largest trading partners to artificially lower the value of their currency (in turn lowering the cost of their exports) to gain an unfair competitive advantage.

Simply explained, in order to weaken its currency, a country sells its own currency and buys foreign currency – usually U.S. dollars. Following the laws of supply and demand, the result is that the manipulating country reduces the demand for its own currency while increasing the demand for foreign currencies.

Currency manipulator is a designation applied by United States government authorities, such as the United States Department of the Treasury, to countries that engage in what is called “unfair currency practices” that give them a trade advantage. Such practices may be currency intervention or monetary policy in which a central bank buys or sells foreign currency in exchange for domestic currency, generally with the intention of influencing the exchange rate and commercial policy. Policymakers may have different reasons for currency intervention, such as controlling inflation, maintaining international competitiveness, or financial stability. In many cases, the central bank weakens its own currency to subsidize exports and raise the price of imports, sometimes by as much as 30-40%, and it is thereby a method of protectionism. Currency manipulation is not necessarily easy to identify and some people have considered quantitative easing to be a form of currency manipulation.

[Following the 1985 Plaza Accord]: Under the 1988 Omnibus Foreign Trade and Competitiveness Act, the United States Secretary of the Treasury is required to "analyze on an annual basis the exchange rate policies of foreign countries … and consider whether countries manipulate the exchange rate between their currency and the United States dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade" and that "If the Secretary considers that such manipulation is occurring with respect to countries that (1) have material global current account surpluses; and (2) have significant bilateral trade surpluses with the United States, the Secretary of the Treasury shall take action to initiate negotiations with such foreign countries on an expedited basis, in the International Monetary Fund or bilaterally, for the purpose of ensuring that such countries regularly and promptly adjust the rate of exchange between their currencies and the United States dollar to permit effective balance of payments".

A designated currency manipulator can be excluded from U.S. government procurement contracts.

According to the Trade Facilitation and Trade Enforcement Act of 2015, the Secretary of the Treasury must publish a semi-annual report in which the developments in international economic and exchange rate policies are reviewed. If a country is labeled a currency manipulator under this Act, "The President, through Treasury, shall take specified remedial action against any such countries that fail to adopt policies to correct the undervaluation of their currency and trade surplus with the United States."
It has been argued that the concept of "currency manipulation" is hypocritical, given that the US already has the privilege of having the main reserve currency of the world, which is needed for international trade. Massive interventions of the Federal Reserve since the financial crisis of 2008, such as Quantitative Easing and interventions in the REPO market have been cited as alleged examples of the U.S.. itself engaging in currency manipulation.

Currency Manipulation ..

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Currency Swap & IRD

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In finance, a currency swap (more typically termed a cross-currency swap, XCS) is an interest rate derivative (IRD). In particular it is a linear IRD, and one of the most liquid benchmark products spanning multiple currencies simultaneously. Currency swap has pricing associations with interest rate swaps (IRSs), foreign exchange (FX) rates, and FX swaps (FXSs).

In finance, a foreign exchange swap, forex swap, or FX swap is a simultaneous purchase and sale of identical amounts of one currency for another with two different value dates (normally spot to forward) and may use foreign exchange derivatives. An FX swap allows sums of a certain currency to be used to fund charges designated in another currency without acquiring foreign exchange risk. It permits companies that have funds in different currencies to manage them efficiently.

A foreign exchange swap has two legs - a spot transaction and a forward transaction - that are executed simultaneously for the same quantity, and therefore offset each other. Forward foreign exchange transactions occur if both companies have a currency the other needs. It prevents negative foreign exchange risk for either party. Foreign exchange spot transactions are similar to forward foreign exchange transactions in terms of how they are agreed upon; however, they are planned for a specific date in the very near future, usually within the same week. It is also common to trade "forward-forward" transactions, where the first leg is not a spot transaction, but already a forward date.

In finance, an interest rate derivative (IRD) is a derivative whose payments are determined through calculation techniques where the underlying benchmark product is an interest rate, or set of different interest rates. There are a multitude of different interest rate indices that can be used in this definition. IRDs are popular with all financial market participants given the need for almost any area of finance to either hedge or speculate on the movement of interest rates. The most basic subclassification of interest rate derivatives (IRDs) is to define linear and non-linear. Further classification of the above is then made to define vanilla (or standard) IRDs and exotic IRDs; see exotic derivative.

Linear IRDs are those whose net present values (PVs) are overwhelmingly (although not necessarily entirely) dictated by and undergo changes approximately proportional to the one-to-one movement of the underlying interest rate index. Examples of linear IRDs are; interest rate swaps (IRSs), forward rate agreements (FRAs), zero coupon swaps (ZCSs), cross-currency basis swaps (XCSs) and single currency basis swaps (SBSs).

Non-linear IRDs form the set of remaining products. Those whose PVs are commonly dictated by more than the one-to-one movement of the underlying interest rate index. Examples of non-linear IRDs are; swaptions, interest rate caps and floors and constant maturity swaps (CMSs). These products' PVs are reliant upon volatility so their pricing is often more complex as is the nature of their risk management.

Devaluation Risks - X ..

Current Account

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The current account records a nation's transactions with the rest of the world—specifically its net trade in goods and services, its net earnings on cross-border investments, and its net transfer payments—over a defined period of time, such as a year or a quarter.

The current account is one half of the balance of payments, the other half being the capital account. While the capital account measures cross-border investments in financial instruments and changes in central bank reserves, the current account measures imports and exports of goods and services, payments to foreign holders of a country's investments, payments received from investments abroad, and transfers such as foreign aid and remittances. Some countries will split the capital account into two top-level divisions (i.e., the financial account and the capital account). In this context, the financial account measures increases or decreases in international ownership of assets, while the capital account measures financial transactions that do not affect income, production, or savings.

According to Trading Economics, the quarter two 2019 current account of the United States was $-128.2 billion.

Key Points:

The current account represents a country's imports and exports of goods and services, payments made to foreign investors, and transfers such as foreign aid.
The current account may be positive (a surplus) or negative (a deficit); positive means the country is a net exporter and negative means it is a net importer of goods and services.
A country's current account balance, whether positive or negative, will be equal but opposite to its capital account balance.
The United States has a significant deficit in its current account.