Factbox-Yellen Watchlist for US Currency Manipulator

FILE PHOTO: Yellen holds a press conference in Washington
FILE PHOTO: U.S. Treasury Secretary Janet Yellen, former chair of the Federal Reserve, holds a news conference in Washington, U.S. December 13, 2017. REUTERS / Jonathan Ernst / File Photo

December 1, 2021

(Reuters) – Treasury Secretary Janet Yellen’s second foreign exchange report, which has yet to be released, threatens to label some US trading partners as currency manipulators, even though the department has since discontinued it. apply that label in your final report.

The designation of a forex manipulator is based on three general criteria: a trade surplus plus $20 billion with the United States, a current account surplus exceeding 2% of GDP, and currency intervention exceeding 2% of total domestic product.

The Treasury in April stopped officially treating Vietnam, Switzerland and Taiwan as currency manipulators, although they have hit some thresholds under 2015 US trade law. The Trump administration designated Switzerland and Vietnam as currency manipulators in December 2020.

In its April report, the Treasury said it had found 11 economies guaranteed to be placed on the “Watch List” of major trading partners.

There are no automatic penalties for currency manipulation labels, although US law requires Washington to require negotiations with designated trading partners.

For the next report, originally scheduled for October 15, analysts say the following trading partners are at risk – but doubt they will get the label.

Graphics: FX Pricing, Switzerland

*Switzerland was branded a currency manipulator by the Trump administration in December 2020, but was officially branded in Yellen’s first report in April.

*Switzerland is likely to meet all three criteria, although analysts doubt it will be specified.

* Switzerland had a bilateral goods trade surplus of $39 billion in the 12 months to June 2021 that exceeded the threshold set by the Ministry of Finance, and the country ran a current account surplus equivalent to 3% of GDP in the 12 months to the end second quarter.

* Although the Swiss National Bank has eased its interventions recently, it spent 25.4 billion francs in the 12 months to June 2021 – equivalent to 3.5% of production. economic volume of Switzerland and more than the 2% limit set by the Treasury.

* However, analysts believe that Switzerland will not be on the list as the Treasury Department (TD) may also consider other factors such as monetary developments, monetary policy and policy action Commerce.


* Taiwan was last officially labeled as a currency manipulator by the United States in December 1992. It was put back on the watch list in 2020.

* Taiwan violated all three criteria, according to analysts at TD, although they did not expect Taiwan to be labeled a currency manipulator.

* According to official data, Taiwan’s trade surplus with the United States reached 29.9 billion USD in 2020, nearly 7 billion USD higher than 2019, while last year’s current account surplus was about 7 billion USD. 11% of GDP, exceeding Washington’s criteria.

* In the first 9 months of this year, Taiwan’s trade surplus with the United States reached 17.94 billion USD, up 5.13 billion USD over the same period last year. The current account surplus in the first half of this year reached about 14.6% of GDP.

* The central bank in September said it made a net purchase of $8.73 billion in the first half of this year to intervene and “avoid serious turmoil” in the currency markets. In comparison, the central bank made a net purchase of $39.1 billion for the whole of 2020. Analysts at TD say Taiwan’s purchases amounted to 7.8% of GDP.

* The Taiwan dollar’s 5.6% gain against the greenback last year was among the strongest in Asia. It is up about 2.5% against the greenback this year and is among the best performing Asian currencies.

* Taiwan’s case is complicated by geopolitical pressures, including rising military tensions with China and the island’s position as a major exporter of semiconductors needed to help ease the supply shortage for US manufacturers.

* The United States is likely to take into account both Taiwan’s unique economic situation related to its booming technology exports and key role in chip manufacturing, as well as the need to show support of the US towards Taiwan in the face of China’s pressure. to decide whether to label it a manipulator.


* Vietnam was branded by the Trump administration as a currency manipulator in December 2020 but was officially branded in the Yellen report in April.

* Vietnam meets the criteria for a trade surplus with the United States of $83.8 billion and foreign exchange intervention, 4.1% of GDP, but not in the current account, according to analysts at TD .

* After reaching an agreement with the US Department of Treasury to curb “competitive devaluation” and make monetary policy and exchange rate more transparent in July, the State Bank of Vietnam (SBV) stopped buying US dollars in the futures market after seven months of doing so and reverted to buying spot dollars.


* The Treasury Department under the Trump administration designated China a currency manipulator on August 5, 2019, but in January 2020, the Treasury dropped the date of designation before signing the preliminary agreement end the Sino-US trade war.

* Trade remains a contentious bilateral issue despite the recent bilateral summit between President Joe Biden and Chinese leader Xi Jinping.

(Reporting by Ben Blanchard in Taipei, Andrew Galbraith in Shanghai, Aradhana Aravindan in Singapore, John Revill in Zurich; Compiled by Saikat Chatterjee; edited by Megan Davies and Leslie Adler) Factbox-Yellen Watchlist for US Currency Manipulator

Bobby Allyn

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