US adds countries to its FX currency manipulation watch list (China not on it)

US Treasury issues its updated (semi-annual) forex manipulator list

  • China, Germany, Ireland, Italy, Japan, Korea, Malaysia, Singapore, and Vietnam all added for monitoring
The US Treasury have lowered the threshold requirement to be on the list designating countries as manipulative.
Here is one country that didn’t make it onto the list of manipulators (but are on the watch list):
U.S. Department of the Treasury semiannual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States
  • reviewed and assessed the policies of an expanded set of 21 major U.S. trading partners
  • Treasury revised and updated the thresholds it uses to assess where unfair currency practices or imbalanced macroeconomic policies may be emerging
  • The Report concluded that while the currency practices of nine countries were found to require close attention, no major U.S. trading partner met the relevant 2015 legislative criteria for enhanced analysis during the period covered by the Report. 
  • Further, no trading partner was found to have met the 1988 legislative standards during the current reporting period.  
  • Treasury’s “Monitoring List” of major trading partners that merit close attention to their currency practices:  China, Germany, Ireland, Italy, Japan, Korea, Malaysia, Singapore, and Vietnam.”
  • Additionally, Treasury will continue its enhanced bilateral engagement with China regarding exchange rate issues, given that the RMB has fallen against the dollar by eight percent over the last year in the context of an extremely large and widening bilateral trade surplus,” said Mnuchin.
  • While China does not disclose its foreign exchange intervention, Treasury estimates that direct intervention by the People’s Bank of China in the last year has been limited.  Treasury continues to urge China to take the necessary steps to avoid a persistently weak currency.  China needs to aggressively address market-distorting forces, including subsidies and state-owned enterprises, enhance social safety nets to support greater household consumption growth, and rebalance the economy away from investment.  Improved economic fundamentals and structural policy settings would underpin a stronger RMB over time and help to reduce China’s trade surplus with the United States.