US FX Report: No currency manipulators so far – UOB

Senior Economist at UOB Group Alvin Liew reviews the latest US FX Report for the month of April.

Key Quotes

“Under the Biden administration and US Treasury Secretary Yellen, the US Treasury released its latest semiannual Report on “Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States” to the US Congress last Friday (16 Apr). The key takeaway was that no economy was labelled as currency manipulator in this report, even though Taiwan (previously being added in the Monitoring List in Dec 2020) and Vietnam (formerly labelled as a currency manipulator in the Dec 2020 report) met all 3 criteria under the Trade Facilitation and Trade Enforcement Act of 2015 (2015 Act) while Switzerland (also formerly labelled as a currency manipulator in the Dec 2020 report) is deemed to have met only 2 of the criteria this time round.”

“The Treasury report concluded that, under the OMNIBUS Trade and Competitiveness Act of 1988 (1988 Trade Act), there is insufficient evidence to make a currency manipulation finding for Vietnam, Switzerland and Taiwan.”

“The Monitoring List was expanded to 11 members (from 10 previously) and continues to include China, Japan, South Korea, Germany, Italy, India, Singapore and Malaysia, as well as Thailand which were officially added in the Dec 2020 Monitoring list. After briefly being dropped in Dec 2020 report, Ireland was re-added to the List in the latest report, while the latest entry to the Monitoring List is Mexico, its first inclusion since Oct 2015, having met two of the three criteria in this Report, which is to have 1) a significant bilateral trade surplus with the US and 2) a material current account surplus over the reporting period.”

“Overall, the latest Treasury report did not rattle the financial markets. Even though the Treasury did not rule out future actions of labelling currency manipulators, the latest action looks like a reset of FX bilateral relations with the new administration while it plans to proactively engage with the economies that are deemed to run afoul of 2015 Act and 1988 Trade Act and with the spotlight on the FX practices of Switzerland, Taiwan and Vietnam.”