The U.S. Treasury Department released an exchange rate report Friday (April 16) that said Taiwan, Switzerland and Vietnam meet the criteria for exchange rate manipulation. But the report also said that there is not enough evidence to conclude that the three economies are manipulating the exchange rate.
The U.S. Treasury also put 11 economies on its exchange rate manipulation watch list, which are China, Japan, South Korea, Germany, Ireland, Italy, India, Malaysia, Singapore, Thailand and Mexico.
The Trade Facilitation and Trade Enforcement Act of 2015 mentions three criteria regarding exchange rate manipulators, which are a merchandise trade surplus of $20 billion or more with the U.S., a current account surplus of more than 2% of the country’s GDP, and unilateral exchange rate intervention for at least six months and net foreign exchange purchases of more than 2% of the country’s GDP. Exchange rate manipulation can result in sanctions under a 2015 U.S. law.
The Treasury Department’s “Macroeconomic and Foreign Exchange Policies of Major Trading Partners” biannual report mentions that the Treasury Department conducted a review of 20 major trading partners this time, of which Switzerland, Vietnam and Taiwan met all three of these criteria.
But the Treasury Department also said that according to a 1988 law, there is not enough evidence to conclude that Vietnam, Switzerland or Taiwan are manipulating the exchange rate.
A Treasury official said it is possible for countries to meet the criteria in the Trade Facilitation and Trade Enforcement Act of 2015 without manipulating their currencies, according to Reuters.
The Treasury Department said in the report that it would “begin to strengthen bilateral engagement with Taiwan. Bilateral engagement will include urging a specific action plan to address the underlying causes of the NT’s undervaluation.”
The report said, “Taiwan’s new Taiwan dollar has appreciated moderately over the past decade in nominal and real effective exchange rates, but the authorities’ foreign exchange purchases and other less formal exchange rate management practices have slowed the pace and size of external adjustments and prevented the new Taiwan dollar from fully reflecting macroeconomic fundamentals.”
The U.S. Treasury also said it will continue to strengthen its engagement with Switzerland and Vietnam and conduct a more comprehensive assessment of global economic developments resulting from the new crown epidemic, which will help determine whether the two countries intervene in foreign exchange markets in 2020 to prevent effective balance of payments adjustments or gain an unfair competitive advantage in trade.
The Treasury Department urged China to be more transparent about its foreign exchange intervention activities, the policy objectives of its exchange rate management mechanism, the relationship between the central bank and state-owned banks’ foreign exchange activities, and offshore renminbi market activities.
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