China won’t use its currency ‘aggressively’ even as tensions with U.S. ramp up, Morgan Stanley says

CNBC reports that China is unlikely to use its currency aggressively as a tool against the U.S., even if tensions continue to ramp up between the two economic giants, Morgan Stanley’s chief economist told CNBC.

“I think there’s another trend that’s emerging ... China doesn’t want its currency to be that volatile, or be seen to be a currency which is not seen to be stable enough to be a long time venue for being a reserve currency,” Morgan Stanley’s Chetan Ahya told CNBC on Thursday. The U.S. dollar is currently the world’s reserve currency, but Beijing has been pushing for greater use of the Chinese yuan internationally.

A weaker yuan has previously been a key source of contention between U.S. and the China, with U.S. President Donald Trump accusing Beijing of intentionally letting its currency slide lower. A weaker yuan makes Chinese exports more attractive, giving them a competitive advantage in international markets, some experts argue.

Last year, the Trump administration labeled China as a currency manipulator after Beijing allowed the yuan to weaken to 7 against the dollar — a closely watched psychological level — for the first time in 11 years.