Taiwan and Thailand risk joining Vietnam and Switzerland in running afoul of US currency manipulation triggers in US Secretary of the Treasury Janet Yellen’s first foreign exchange report, expected this week, but whether she would apply that label is unclear.
US President Joe Biden’s administration has sought to engage more constructively with trading partners and allies, and currency experts say Yellen could veer from the aggressive approach applied by the administration of former US president Donald Trump in the currency report, taking into account the trade and capital flow distortions amid the COVID-19 pandemic, and reviewing the structure of the report.
“I think the Yellen Treasury would be inclined to take a more flexible approach,” said Matthew Goodman, a former US Treasury official now with the Center for Strategic and International Studies.
However, Yellen’s hands are “tied somewhat” by the criteria applied to deciding whether a trading partner manipulates its currency, Goodman added.
Yellen also has challenges in softening Washington’s position, facing pressure from labor unions and Democrats in the US Congress to maintain a tough stance on currency manipulation.
Trading partners are labeled manipulators if they meet specific criteria — a more than US$20 billion bilateral trade surplus with the US, foreign currency intervention exceeding 2 percent of GDP and a global current account surplus exceeding 2 percent of GDP — which led the Trump administration to label Switzerland and Vietnam as currency manipulators in December last year.
US law requires the Treasury to seek negotiations with manipulators to bring them back below the thresholds, with specified remedies, including denying them access to US government procurement contracts and development finance.
The report is expected to signal how strictly Yellen interprets the criteria, or whether she reverses tightening moves by her predecessor, Steven Mnuchin, who reduced the current account threshold to 2 percent of GDP from 3 percent, ensnaring more countries.
Foreign exchange analysts say that Taiwan, with a current account surplus of 14 percent last year, a record US$30 billion trade surplus with the US and net foreign exchange purchases of nearly 6 percent of GDP, is firmly in the Treasury’s crosshairs during this cycle, even though the New Taiwan dollar remains near 23-year highs.
Vietnam, Thailand and Singapore are in similar straits, analysts said.
BBH analyst Win Thin also sees Malaysia and South Korea at risk.
Although the Swiss National Bank appears to have sold off a tiny portion of its nearly US$1 trillion foreign currency pile to show goodwill to the US Treasury, “that won’t be enough to get off the list,” Credit Suisse economist Maxime Botteron said.
The Treasury declined to comment on the contents of the forthcoming currency report, as did the Swiss National Bank .
For Vietnam, the designation has bigger consequences, as the Office of the US Trade Representative has an active investigation on Hanoi’s currency practices that could lead to US tariffs on imports from Vietnam.
A number of countries are expected to remain or appear on the “monitoring list,” Thin said, among them China, Germany, Japan, Italy, India, Singapore, Ireland and Mexico.
The rise of the cryptocurrency dogecoin has reached a new level after the token was used to pay for a lunar satellite launch. SpaceX, Elon Musk’s commercial rocket firm, is to embark on a moon voyage next year carrying a so-called cubesat — a mini-satellite used for space research — from Geometric Energy Corp that has been paid for entirely in dogecoin. The development is the latest twist in the saga over the digital token, which started as a joke in 2013, but is now a dominating Internet meme and sitting on a 21,000 percent rally in the past year. Musk has
CAPACITY EXPANSION: Construction of the site, which is to be the firm’s first mRNA production facility outside of Europe, is to begin this year and likely finish in 2023 COVID-19 vaccine maker BioNTech SE yesterday said it would build a Southeast Asia headquarters and manufacturing site in Singapore to produce hundreds of millions of messenger RNA (mRNA)-based vaccines per year. Construction of the site would start this year, and it could become operational by 2023, the German company said in a statement. “With this planned mRNA production facility, we will increase our overall network capacity, and expand our ability to manufacture and deliver our mRNA vaccines and therapies to people around the world,” BioNTech chief executive Ugur Sahin said. The vaccine produced by BioNTech jointly with Pfizer Inc of
OUTBREAK: About 200 of the airline’s 1,200 pilots are not able to work. Most of them have been quarantined to prevent further infection, but 12 have COVID-19 China Airlines Ltd (CAL,中華航空) yesterday confirmed that it would temporarily reduce its cargo flight services to cope with a pilot shortage, as one-sixth of its pilots have been sidelined by a COVID-19 outbreak. “We are working out a new schedule,” the airline said in a statement after local news media reports on Saturday said that it would be reducing its cargo services from Wednesday, primarily affecting US destinations. CAL declined to give details about its new operating plan, but the reports said that it would be suspending its cargo flights to Dallas Fort Worth International Airport, Hartsfield-Jackson Atlanta International Airport and
The Financial Supervisory Commission (FSC) yesterday fined Citibank Taiwan Ltd (花旗台灣) NT$10 million (US$357,194) and DBS Bank Taiwan (星展台灣) NT$6 million for breaches of the nation’s anti-money laundering (AML) regulations. The NT$10 million fine is the highest penalty that it has imposed on a domestic bank, the commission said. Citibank Taiwan failed to set up a sound mechanism for evaluating clients’ risk of money laundering and for detecting suspicious transactions, Banking Bureau Deputy Director-General Huang Kuang-hsi (黃光熙) told a news conference in New Taipei City. The bank based its AML policies on those of its US-based parent company, Citigroup Inc, but the policies