David Lowder
WASHINGTON (Reuters) – The U.S. Treasury Department on Thursday said no major trading partner appeared to have manipulated its currency last year, but added Japan to a foreign exchange “monitoring list” along with China, Vietnam, Taiwan, Malaysia , Singapore and Germany. which were on the previous list.
The Treasury’s semi-annual foreign exchange report found that none of the countries examined met all three criteria, prompting an “extensive review” of their foreign exchange practices over the four quarters to December 2023.
Countries are automatically added to the list if they meet two of three criteria: a trade surplus with the United States of at least $15 billion, a global account surplus greater than 3% of GDP, and persistent unilateral net foreign exchange purchases of at least $2 billion USA. % of GDP for 12 months.
The Treasury Department said Japan, Taiwan, Vietnam and Germany meet the criteria for a trade surplus and an excessive current account surplus.
Singapore met the criteria for participation in continuous foreign exchange interventions and a significant current account surplus, and Malaysia met only the criteria for a current account surplus, but once on the list, it takes two foreign exchange reporting cycles to be eliminated.
China remained on the watch list due to its large trade surplus with the US and lack of transparency regarding its monetary policy.
“China’s failure to publish information on foreign exchange interventions and a broader lack of transparency about key features of its exchange rate mechanism continue to set it apart among major economies and require close monitoring by the Treasury,” the Treasury report said.
The report also raises questions over China’s reporting of its current account balance, which showed its surplus fell to 1.4% of GDP in 2023 from 2.5% in 2022. The Ministry of Finance said China’s balance of payments data was released by the State Administration of Foreign Exchange. The country’s trade surplus appears to contradict data from China’s customs and other trading partners.
A U.S. Treasury Department spokesman said the agency is trying to understand such “anomalies.”
JAPANESE INTERVENTIONS
The official said Japan’s recent foreign exchange interventions to support the yen were not a factor in the decision to place the country on the currency monitoring list. The official noted Japan’s high trade surplus with the United States in 2023 of $62.4 billion, as well as a global current account surplus of 3.5% of GDP, up from 1.8% in 2022.
But the Treasury report said Japan intervened in April and May 2024 – outside the period covered by the report – for the first time since October 2022, buying yen and selling dollars to shore up the value of the yen.
The Treasury Department said Japan is transparent in its foreign exchange operations, but added: “Treasury expects that in large, freely traded foreign exchange markets, interventions should be reserved only for very exceptional circumstances, with appropriate prior consultation.”
Speaking to reporters on Thursday, Japan’s top currency diplomat Masato Kanda said he saw no problem with Japan’s inclusion on the US currency watch list, adding that it was assessed against mechanical criteria.
The report said most foreign exchange interventions in 2023 focused on selling dollars—actions that strengthen the value of a currency against the dollar. The dollar has strengthened over the past two years as the Fed sharply raised interest rates to cool inflation.
The bigger concern in the Treasury report is interventions to buy dollars and thereby weaken other currencies.
“It is therefore not surprising that in the four quarters to December 2023, no trading partners were found to have manipulated the exchange rate of their currency against the US dollar in order to prevent effective balance of payments adjustments or gain an unfair competitive advantage. in international trade,” the Ministry of Finance said.
Vietnam’s current account surplus jumped to 5.8% of GDP in 2023, and its goods and services trade surplus with the US stood at $103 billion, meeting the watch list criteria.
Vietnam, which is seeking U.S. recognition as a market economy, “reliably reported” to the Treasury Department that it made net foreign currency purchases equivalent to 1.5% of GDP in 2023, below the Treasury’s 2% threshold.
The Treasury said it “remains pleased” with Vietnam’s progress in modernizing its monetary policy transparency and exchange rate management and will continue to work closely with the State Bank of Vietnam.