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One major impetus behind U.S. President Donald Trump's protectionist policies is his belief China has artificially weakened its currency in order to dump goods in the United States.Investors were also reassured by the fact the world's second most powerful economy, China, had a vested interest in a relatively strong, stable dollar, owing to the fact a large portion of its massive stock of foreign-exchange reserves was held in dollars.Hence, the paradox: though the source of the problem was the U.S., money went rushing to the U.S., strengthening the dollar.The logic was simple: by buying dollars, China could cause the relative value of the dollar to rise, which meant that the value of the renminbi would fall.With the U.S. and many other nations now hooked on buying from China, Chinese policymakers no longer need to maintain an undervalued currency. Indeed, China has been spending down its foreign-exchange reserves since mid-2014 . Let's assume Trump is right – that China is still selling its products to U.S. consumers at a loss.
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