The US Treasury has just added Sing., Malaysia and Vietnam to a watch-list for currency (money) manipulation, putting their Fx (foreign-exchange) policies under scrutiny.
Sing. (Singapore) made the list because of its large current account surplus and net foreign currency purchases of at least $17-B in Y 2018, equivalent to 4.6% of GDP, according to the US Treasury.
Malaysia and Vietnam were cited for their bi-lateral trade and current account surpluses.
Countries with a current-account surplus with the US equivalent to 2% of GDP are now eligible for the list, down from 3%.
Other reasons include persistent intervention in markets for a nation’s currency, and a trade surplus of at least $20-B. Countries that meet 2 of the 3 criteria are placed on the watch list.
Being labeled a currency manipulator does not come with immediate penalties but can/do rattle financial markets and cause money transfer issues with the US.
Singapore’s central bank said in a statement that “it does not manipulate its currency for export advantage.” The Monetary Authority of Singapore uses the exchange rate to ensure price stability and cannot use it to gain an export advantage or achieve a current account surplus, it said.
Malaysia’s central bank said the country supported free and fair trade and didn’t have unfair currency practices, adding that inclusion on the list had no consequences for the country’s economy.
Vietnam is at risk of meeting all 3 of the Treasury’s new criteria for the currency manipulator label. The Treasury excused Vietnam’s recent currency intervention, citing movements in both directions and net foreign exchange purposes that had “reasonable rationale” to rebuild reserves.
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