The US Department of the Treasury yesterday kept Taiwan on its watch list of trade partners whose currency practices "merit close attention.”
The department said it was strengthening scrutiny of countries' foreign-exchange practices, including their interventions to resist both depreciation and appreciation against the US dollar.
No major trading partner met all three criteria for enhanced analysis of currency practices during the last half of 2024 and the first six months of last year, the report said.
Photo: Reuters
Traditionally, the department’s three main criteria for analyzing foreign exchange and determining manipulation are a trade surplus with the US of at least US$15 billion, a global current account surplus above 3 percent of GDP and persistent, one-way net foreign-exchange purchases that reach 2 percent of GDP.
Countries that meet two of these are automatically added to the list.
In its latest report, the department added Thailand to its "monitoring list" of countries warranting close attention due to the growth of the country's global current account surplus and its trade surplus with the US.
The addition brings the monitoring list to 10 economies, with Taiwan, China, Japan, South Korea, Singapore, Vietnam, Germany, Ireland and Switzerland remaining on the list.
Taiwan recorded a trade surplus of US$100 billion with the US during the report period (US$94.1 billion according to Taiwan government statistics), while its current account surplus was 15 percent of GDP, the report said.
However, its net purchases of foreign exchange in the reporting period, totaling US$5.9 billion, represented only 0.7 percent of GDP, the report said.
Taiwan's "extremely large current account surplus" has persisted largely because of elevated demand for technology products, the report said, describing the bilateral trade surplus with the US as having "grown considerably," continuing a five-year trend.
On foreign-exchange intervention, the department said that Taiwan's central bank made small net purchases of foreign currency during the period, mostly in May last year amid heightened market volatility.
Despite this, the New Taiwan dollar appreciated 11.2 percent against the US dollar during the report period before partially retreating in the following months, it said.
The report also highlighted Taiwan's Nov. 14 joint statement with the US Treasury committing to publicly disclose information on foreign-exchange interventions at least quarterly.
Traditionally, the report has focused on whether countries are engaging in one-sided currency intervention or other manipulation to resist appreciation against the US dollar to keep their exports cheaper.
However, going forward, the department said it "is now monitoring more broadly the extent to which economies that choose to smooth exchange rate movements do so to resist depreciation pressure in the same manner as they do to resist appreciation pressure."
In particular, it would be looking to see whether countries' interventions to resist depreciation against the US dollar are symmetrical with their efforts to resist appreciation, or less aggressive, a treasury official said.
The department also said that for countries on the monitoring list, it would analyze whether other government policies are influencing foreign-exchange markets, such as capital controls, macroprudential measures or the use of government investment vehicles or pension funds.
It would also study countries' use of foreign-exchange swaps to sterilize or offset spot interventions to minimize their impacts on domestic monetary conditions, as well as trading partners' net forward positions.
The department did not label China a currency manipulator, despite what it called "depreciation pressure" facing the yuan.
However, it said that China "stands out among our major trading partners in its lack of transparency around its exchange rate policies and practices," repeating language from its previous report in June last year.
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