Vietnam to join China in the US currency manipulation report? – ING

Francesco Pesole, FX strategist at ING, suggests that the markets resonance of the October update of the US semi-annual Treasury reports on FX manipulation will depend heavily on what justifications will be given around the labelling of China as a manipulator in August and whether Vietnam will also join the list.

Key Quotes

“The strong political connotation of the latest reports suggests that the conclusions drawn by the report will heavily depend on how they fit into the US administration’s trade agenda.”

“In turn, removing China as an FX manipulator may be a premature move for the US given that a fully-fledged trade deal with China is still quite far and President Trump might like to use that as leverage to push for a currency deal. Around this point, expect large sections of the report to focus on the importance of transparent FX interventions reporting, especially in Asian countries.”

“Our estimates suggest Vietnam has all the prerequisites to be labelled an FX manipulator. The country has been used to reroute some Chinese exports to avoid US tariffs, so President Trump would not lack the reasons to target the country with hostile trade policy.”