CURRENCY
MONITORING LIST - REPORT AND INDICES
News: US Treasury removes India from its Currency Monitoring List
What's
in the news?
●
The US Department of Treasury removed India along with Italy, Mexico,
Thailand and Vietnam from its Currency Monitoring List of major trading
partners that merit close attention to their currency practices and
macroeconomic policies.
●
India had been on the list for the last
two years.
● The move came on a day when Secretary of the Treasury Janet Yellen visited New Delhi and held talks with Finance Minister Nirmala Sitharaman.
Key
takeaways:
●
China,
Japan, Korea, Germany, Malaysia, Singapore, and Taiwan are the seven economies
that are a part of the current monitoring list,
the Department of Treasury said in its biannual report to the Congress.
● India and four other countries were removed from the Monitoring List as they now only met one of the three criteria for two consecutive reports.
Currency
Monitoring List:
●
The Currency Monitoring List of the United
States major trading partners is a list of countries that should pay close
attention to their currency practices and macroeconomic policies.
●
It is essentially a watchlist of countries
with potentially “questionable foreign
exchange policies” and “currency manipulation.”
● The US government assigns the currency manipulator label to countries that it believes are engaging in unfair currency practices by deliberately devaluing their currency against the dollar.
Criteria:
●
A country’s inclusion in the list is based
on three key criteria such as
○
A significant
bilateral trade surplus with the United States is a goods and services
trade surplus that is at least $15 billion.
○
A material
current account surplus is one that is at least 3% of GDP, or a surplus for
which Treasury estimates there is a material current account “gap” using
Treasury’s Global Exchange Rate Assessment Framework (GERAF).
○ Persistent, one-sided intervention occurs when net purchases of foreign currency are conducted repeatedly, in at least 8 out of 12 months, and these net purchases total at least 2% of an economy’s GDP over a 12-month period.
Tag:
●
Countries are kept on the list for two
report cycles to ensure that any improvements in the country’s performance are
not due to temporary factors.
●
A country that meets two of the three criteria is added to the Watch List.
● The Treasury classifies countries that meet all three criteria as currency manipulators.
Impact:
● Designation of a country as a currency manipulator does not immediately result in penalties. However, it tends to erode a country’s confidence in global financial markets.
Countries
on the list:
According to the report,
these countries are presently on the list.
●
China
●
Japan
●
Korea
●
Germany
●
Malaysia
●
Singapore
● Taiwan
Countries
removed from the list:
●
India
●
Italy
●
Mexico
●
Thailand
●
Vietnam.