The US Department of Treasury removed India from its Currency Monitoring List after two years. The move came on the day when Secretary of the Treasury Janet Yellen visited New Delhi and held talks with Finance Minister Nirmala Sitharaman.
Other countries that were also removed from the List are Italy, Mexico, Thailand and Vietnam. The countries that have been removed from the list have met only one out of three criteria for two consecutive reports, the Department of Treasury said in its biannual report to the Congress.
China, Japan, Korea, Germany, Malaysia, Singapore, and Taiwan, on the other hand continue to be a part for the monitoring list. The Treasury said China’s failure to publish foreign exchange intervention and broader lack of transparency around key features of its exchange rate mechanism makes it an outlier among major economies and warrants Treasury’s close monitoring.
Here’s when a country is put under currency watch list:
There are three criteria based on which a country is put under the US Treasury’s Currency Monitoring List and any nation fulfilling two of the three points in the US’ Trade Facilitation and Trade Enforcement Act of 2015 is put under the list. They are as follows:
1) A “significant” bilateral trade surplus with the US — at least $20 billion in 12 months.
2) A material current account surplus equivalent to at least 2 per cent of GDP over a 12-month period.
3) “Persistent”, one-sided intervention — when net purchases of foreign currency totalling at least 2 per cent of the country’s GDP over a 12-month period are conducted repeatedly, in at least six out of 12 months.
‘Currency Manipulator’
If a country meets all three criteria, it is labeled as a ‘Currency Manipulator’ by the US Department of Treasury. Once on the Monitoring List, an economy will remain there for at least two consecutive reports “to help ensure that any improvement in performance versus the criteria is durable and is not due to temporary factors”.
Notably, Switzerland once again exceeded the thresholds for all three criteria, which is a parameter for being labelled as a ‘Currency Manipulator’. But the term was not used by the Report and the Treasury Department maintained that there is not enough evidence to use the label for Switzerland.
