Sat, May 11, 2019 - Page 10 News List

US expands currency manipulation vetting

Bloomberg

The administration of US President Donald Trump is to expand the number of nations it scrutinizes for currency manipulation in an upcoming report, people familiar with the matter said, after lowering the bar for foreign governments to come under scrutiny.

Vietnam could be named a manipulator outright for artificially holding down the value of the dong, the people said, after meeting all three criteria the US Department of the Treasury uses to test for currency interventions.

Internal debate is continuing over the issue and the administration has asked Vietnam to disclose more information before it releases the report.

The treasury department issues a report twice annually on foreign currencies. In the latest report, expected this month, the number of nations whose currency practices the US examines for possible manipulation is to rise to about 20, from 12, people familiar with the matter said.

The number increased after the treasury department reduced one of the three criteria it uses to test for manipulations, the people said — current account surplus, which captures the difference between the amount a nation exports and imports.

The criteria was reduced to a surplus of 2 percent of GDP from 3 percent.

The people asked not to be identified because the report has not yet been issued and they were not authorized to speak publicly about it.

Trump has in the past tweeted that China, Russia and the EU all manipulate their currencies to gain an unfair trade advantage over the US.

He vowed on the election campaign trail to label China a currency manipulator on his first day in office, but US Secretary of the Treasury Steven Mnuchin has yet to do so because he has said Beijing does not meet criteria set by US Congress.

Russia and the EU also have not been officially designated currency manipulators.

The label has no practical effect, other than requiring the US to engage in negotiations with offending nations, but would have market repercussions for any government named a manipulator.

Currency policy has been a central tenet of trade deals that Trump has struck with Mexico, Canada and South Korea, and it is expected to be part of an agreement with China, should one be reached.

The treasury department’s latest report is also expected to remove India and South Korea from its watch list for foreign-exchange practices of nations it monitors closely.

A treasury department spokesman declined to comment on specifics of the report ahead of its release.

The report was officially due to be sent to US Congress last month.

Mnuchin had initially expected to meet that deadline and had submitted the completed report to the White House for sign-off early last month, but it has since been delayed, two of the people said.

A spokesman said the treasury department has full control of the report and no officials outside the agency had influenced it.

The US has not labeled a major trade partner a currency manipulator since 1994.

The treasury department has examined its 12 largest trade partners and Switzerland. An expanded watch list could include Russia, Thailand, Indonesia, Vietnam, Ireland or Malaysia, all of which have large trade surpluses with the US.

In addition to current account surplus, the criteria to assess if a nation is interfering in its currency value are a minimum US$20 billion trade surplus with the US and repeated interventions in currency markets.

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