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Capitol Report: U.S. Treasury removes forex manipulation label from Switzerland, Vietnam

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The U.S. Treasury Department on Friday removed the foreign-exchange manipulator label from Vietnam and Switzerland that the Trump administration had placed on the two countries in December.

The department said it did not have evidence that Vietnam
USDVND,
-0.02%

and Switzerland
CHFUSD,
+0.42%

were manipulating their currencies, but said they qualified for “enhanced analysis” and would continue to hold bilateral talks.

The department also said Taiwan
TWDUSD,
0.01

has met the criteria for enhanced analysis and it would seek to hold bilateral talks about the country’s currency practices.

In a twice-yearly report to Congress, Treasury said that China did not meet criteria for currency manipulation or for enhanced engagement.

Treasury urged China to improve its transparency regarding its foreign exchange intervention activities, including the relationship between the central bank and foreign exchange activities of the state-owned banks.

“Treasury is working tirelessly to address efforts by foreign economies to artificially manipulate their currency values that put American workers at an unfair disadvantage,” said Treasury Secretary Janet Yellen in a statement.

Treasury added Ireland
EURUSD,
+0.20%

and Mexico
USDMXN,
-0.05%

to its list of eleven economies on a “monitoring list” that merit close attention to their currency practices.

Also on the list are China
CNHUSD,
+0.08%
,
Japan
USDJPY,
+0.01%
,
South Korea
USDKRW,
-0.18%
,
Germany
EURUSD,
+0.20%
,
Italy
EURUSD,
+0.20%
,
India
USDINR,
-0.34%
,
Malaysia
MYRUSD,
-0.04
,
Singapore
SGDUSD,
+0.11%
,
and Thailand
THBUSD,
-0.22
.

Under the 2015 Trade Enforcement Act, the three criteria for “enhanced engagement” are: a trade surplus exceeding $20 billion over 12 months; a global current account surplus of at least 2% over the same period; and net purchases of foreign currency amounting to at least 2% of its GDP.

Treasury said that none of the three countries, as of yet, met the stricter criteria under a separate 1988 law that the countries “intervened in currency markets to prevent effective balance of payments adjustment or gain an unfair competitive advantage in trade.”

Wall Street analysts have previously noted the consequences of the labeling are not enormous. The upcoming talks are seen as a chance to gauge the Biden administration’s trade policy stance.

The Trump administration took no punitive action after labeling Switzerland and Vietnam as currency manipulators.

The Swiss National Bank
CHFUSD,
+0.42%

denied any form of currency manipulation.

Meanwhile, the U.S. dollar was down 0.2% Friday at 91.542, as gauged by the ICE U.S. Dollar Index 
DXY,
-0.14%

 a measure of the buck against a half-dozen currencies. The dollar is down 0.7% so far this week and off 1.8% in April so far.

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