December 1, 2021
(Reuters) – Treasury Secretary Janet Yellen’s second forex report has not yet been released, but there is a risk of labeling some US trading partners as currency manipulators, but the ministry said in a previous report. Postponed the application of the label.
Forex manipulator designations are based on three broad criteria: a trade surplus of over $ 20 billion with the United States, a current account surplus of over 2% of GDP, and currency intervention of over 2% of GDP.
The Ministry of Finance in April was unable to officially brand Vietnam, Switzerland and Taiwan as currency manipulators, but exceeded some standards under the US Trade Act of 2015. The Trump administration labeled Switzerland and Vietnam as currency manipulators in December 2020.
In a report in April, the Treasury said it found that 11 economies needed to be on the “watch list” of major trading partners.
US law requires Washington to require negotiations with a designated trading partner, but there is no automatic punishment due to the label of the currency manipulator.
Analysts said the next report, originally scheduled for October 15, puts the next trading partner at risk, but it’s doubtful if they will get the label.
Graphics: FX Ratings, https: //fingfx.thomsonreuters.com/gfx/mkt/byprjkagape/FX%20valuations.JPG Switzerland
* Switzerland was labeled as a currency manipulator by the Trump administration in December 2020, but was spared from being officially branded in Yellen’s first report in April.
* Analysts do not believe that Switzerland will be designated, but Switzerland may meet all three criteria.
* Switzerland’s bilateral trade surplus for the 12 months to June 2021 was $ 39 billion, which exceeds the Ministry of Finance’s standards, and the current account surplus for the 12 months to the end of the second quarter is 3 of GDP. Equivalent to%.
* The Swiss National Bank recently curtailed its intervention, spending CHF25.4 billion in the 12 months to June 2021. This is equivalent to 3.5% of Switzerland’s economic output and exceeds the 2% limit set by the Ministry of Finance.
* Still, the Treasury (TD) considers Switzerland not on the list, as other factors such as currency development, monetary policy, and trade policy behavior can be considered.
* Taiwan was finally officially labeled as a currency manipulator by the United States in December 1992. It was returned to the watch list in 2020.
* According to TD analysts, Taiwan has violated all three criteria, but does not expect Taiwan to be considered a currency manipulator.
* According to official data, Taiwan’s trade surplus with the United States reached $ 29.9 billion in 2020, about $ 7 billion more than in 2019, but last year’s current account surplus was about 11% of GDP. It exceeds the standards of Washington.
* In the first nine months of this year, Taiwan’s trade surplus with the United States reached $ 17.94 billion, an increase of $ 5.13 billion from the same period last year. The current account surplus in the first half of this year reached about 14.6% of GDP.
* The central bank said in September that it had purchased a net $ 8.73 billion in the first half of this year to intervene in the currency markets and “avoid serious turmoil.” By comparison, central banks purchased a net $ 39.1 billion across 2020. TD analysts said Taiwan’s purchases reached 7.8% of GDP.
* Taiwan dollar’s rise of 5.6% against the greenback last year was one of the strongest in Asia. It is one of the best currencies in Asia, up about 2.5% against this year’s greenback.
* Taiwan’s case is complicated by geopolitical pressures, including heightened military tensions with China, and Taiwan’s position as a major exporter of semiconductors needed to alleviate supply shortages by US manufacturers. ..
* The United States may take into account both Taiwan’s special economic situation for fast-growing technology exports and its important role in chip manufacturing. Decide whether to label it as a manipulator.
* Vietnam was labeled as a currency manipulator by the Trump administration in December 2020, but was spared from being officially branded in the April Yellen report.
* According to TD analysts, Vietnam met the US trade surplus standard of $ 83.8 billion and foreign exchange intervention, which is 4.1% of GDP, but not the current account balance.
* After reaching an agreement with US Treasuries to make monetary and foreign exchange policies more transparent ahead of a “competitive devaluation” in July, the Vietnam State Bank (SBV) will be in the futures market seven months later. I have stopped buying US dollars. By doing so, I returned to buying Spot Dollars.
* The Ministry of Finance under the Trump administration designated China as a currency manipulator on August 5, 2019, but in January 2020, the Ministry of Finance will sign a preliminary agreement to end the US-China trade war. Withdrew the designation a day ago.
* Despite the recent bilateral summit between President Joe Biden and Chinese leader Xi Jinping, trade remains a controversial bilateral issue.
(Report by Ben Blanchard in Taipei, Andrew Galbraith in Shanghai, Aradana Arabindan in Singapore, John Revil in Zurich, edited by Cycut Chatterjee, edited by Megan Davis and Leslie Adler)
Fact Box-Yellen’s Watchlist for US Currency Manipulator Tags
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