The US expands its currency-manipulation watchlist

Currency policy has emerged as President Trump’s latest tool to rewrite trade rules
Chief Investment Office29 May 2019
    Photo credit: AFP Photo


    The Trump administration again refrained from labelling China a currency manipulator on Tuesday (28 May), a decision that leaves one of the president’s campaign promises unfulfilled but avoids further escalation in the trade war between the world’s two largest economies.

    The Treasury Department issued its semi-annual foreign-exchange report to Congress, expanding the number of countries it scrutinises for currency manipulation to 21 from 12. Five countries – Ireland, Italy, Vietnam, Singapore, and Malaysia – joined China, Japan, South Korea, and Germany on a watchlist for manipulation, while India and Switzerland were removed.

    The report was officially due in mid-April but was delayed partly due to the changes to the criteria used to evaluate countries, a senior Treasury official told reporters Tuesday.

    Designation as a currency manipulator comes with no immediate penalties but can rattle financial markets. Vietnam was at risk to be designated, Bloomberg News reported earlier this month, but avoided the label after officials visited Washington last week (ended 24 May).

    Currency policy has emerged as US President Donald Trump’s latest tool to rewrite global trade rules that he says have hurt American businesses and consumers. He has made foreign-exchange policy a key piece of trade deals with Mexico, Canada, and South Korea, and it is expected to be part of an agreement with China, should one be reached.

    The administration last week ramped up its focus on foreign exchange, proposing tariffs on goods from countries found to have undervalued currencies. The Commerce Department’s move would let US-based companies seek anti-subsidy tariffs on products from countries found by Treasury to be engaging in competitive devaluation of their currencies. Currently no country meets that criteria.

    Treasury’s currency report and the Commerce Department’s proposal are separate and follow different laws, according to a senior Treasury official.

    The number of countries on the US watch list expanded after Treasury Secretary Steven Mnuchin lowered the threshold for qualification.

    “Treasury takes seriously any potentially unfair currency practices, and Treasury is expanding the number of US trading partners it reviews to make currency practices fairer and more transparent,” he said in a statement.

    The US has not labelled a major trade partner a currency manipulator since 1994. – Bloomberg News.

    On Tuesday (28 May), the US Dollar Index (DXY) climbed 0.35% to 97.952, the pound fell 0.21% to USD1.2653, the euro lost 0.30% to USD1.1160, and the yen gained 0.12% to 109.38 per dollar.

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