U.S. Currency Manipulation Threat Puts Asian Nations on Guard
Michelle Jamrisko and Chester Yung, Bloomberg News
Commercial buildings in the central business district (CBD) stand illuminated at night in Singapore, on Friday, July 12, 2019. An unexpected contraction in Singapore’s economy and a slump in China’s exports sent a warning shot to the world economy as simmering trade tensions wilt business confidence and activity. Photographer: Ore Huiying/Bloomberg
Commercial buildings in the central business district (CBD) stand illuminated at night in Singapore, on Friday, July 12, 2019. An unexpected contraction in Singapore’s economy and a slump in China’s exports sent a warning shot to the world economy as simmering trade tensions wilt business confidence and activity. Photographer: Ore Huiying/Bloomberg , Bloomberg
(Bloomberg) -- Asia is bracing for the latest U.S. Treasury report on foreign currency manipulators, coming in the middle of a trade war that shows no sign of ending.
The twice-yearly report is due in coming weeks and will likely see the return of Singapore, Malaysia and Vietnam on the watchlist. The three Southeast Asian nations were cited in the May report for the first time, and the Treasury says it keeps newcomers on the list for at least two straight reports. China -- which was formally labeled a currency manipulator in August -- Japan and South Korea were the other Asian economies cited at the time.
A country makes it on the watchlist if it’s met two of three criteria: a trade surplus with the U.S. of at least $20 billion; a current-account surplus of a minimum of 2% of gross domestic product; and persistent, one-sided intervention in the currency equivalent to 2% of GDP in six months of a year
Analysts at ING Groep NV see that patience running out for the next report -- especially with Vietnam exceeding both of the other two thresholds.
“President Trump has often found a different basis (for instance, national security) to impose tariffs on a country,” Francesco Pesole, ING’s London-based FX strategist, said in an Oct. 14 research note. “Vietnam seems particularly at risk of being hit by U.S. tariffs and the Trump administration may consider using the FX manipulator label to threaten tariffs.”
Can Van Luc, chief economist at Hanoi-based Bank for Investment and Development of Vietnam, said the central bank has been more flexible in managing the currency. The government has also been doing much to improve the trade situation, including “conducting a master plan on anti-trade fraud, while trying to buy more from America,” he said. “However, it takes time to balance trade with the U.S.”
Japan is likely to be flagged on two of three violations again -- a goods trade surplus with the U.S. that’s already climbed to more than $48 billion so far this year, and a large current account balance. In its latest monthly report on the issue, Japan maintains that it’s still not intervening in the foreign exchange market
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