Janet Yellen warned US trading partners against currency manipulation and touted the importance of market-based exchange rates, in her most exhaustive comments yet on the incoming Biden administration’s approach to international economic policy.
Ms Yellen, who is Joe Biden’s nominee to serve as Treasury secretary, said “the intentional targeting of exchange rates to gain commercial advantage is unacceptable”, and she would “oppose any and all attempts by foreign countries to artificially manipulate currency values to gain an unfair advantage in trade”.
Ms Yellen, the former Federal Reserve chair, was speaking during a confirmation hearing before the Senate finance committee, where she is expected to receive broad backing to take the top cabinet job responsible for managing the US economy under Mr Biden.
During the hearing, Ms Yellen also said the Biden administration would “take on China’s abusive, unfair and illegal practices” — her toughest comments yet with regard to Beijing, adding that the new US president was prepared to use the “full array of tools” to redress them.
She specifically took issue with China “erecting trade barriers and giving illegal subsidies to corporations”, as well as “stealing intellectual property” and its “global labour and environmental standards”.
Ms Yellen’s approach reflects some continuity with the Trump administration’s combative stance on international economics. But she stressed that the US would “need to work with allies” to rein in Beijing, which the outgoing president struggled to do.
While Donald Trump often touted his desire for a weaker dollar, Ms Yellen made clear that the “United States does not seek a weaker currency to gain competitive advantage”.
Her main message to lawmakers during the hearing, however, was on the domestic side. She made the case for quick approval of the $1.9tn economic relief package Mr Biden announced last week, saying deficit concerns should take a back seat given the uneven, struggling recovery.
“Neither the president-elect, nor I, propose this relief package without an appreciation for the country’s debt burden,” Ms Yellen said. “But right now, with interest rates at historic lows, the smartest thing we can do is act big. In the long run, I believe the benefits will far outweigh the costs, especially if we care about helping people who have been struggling for a very long time.”
Ms Yellen’s confirmation is not expected to face any big obstacles, given her credentials and history at the Fed, which make her a familiar face on Capitol Hill. A group of former US Treasury secretaries from both main political parties on Tuesday also backed her nomination for the job.
US stocks rose as Ms Yellen spoke, with the S&P 500 index 0.9 per cent higher in afternoon trading. Treasuries, meanwhile, sold off alongside the dollar. The yield on the benchmark 10-year note rose roughly 0.01 percentage points to trade at 1.09 per cent, while 30-year bond yields climbed by the same amount to 1.84 per cent, before reversing slightly. Yields rise as prices fall. The dollar index edged 0.3 per cent lower.
During her testimony, Ms Yellen left open the possibility of the Treasury department issuing longer-dated debt beyond the 30-year maximum currently in place in order to lock in historically low borrowing costs for the US government.
“There is an advantage to funding the debt, especially when interest rates are very low, by issuing long-term debt,” she said during her testimony, adding that she would look into potential demand for a 50-year bond.
Steven Mnuchin, the outgoing Treasury secretary, had previously toyed with the idea of issuing ultra long-dated debt, but opted against it after officials found no “notably strong or sustainable” demand for debt beyond 30 years in the US market.