There was perhaps a sigh of relief in Hanoi and Berne as the US Treasury reversed the Trump administration’s decision to label both Vietnam and Switzerland as currency manipulators. But while the Biden administration chose not to label any country as a currency manipulator this time, Thailand, Malaysia and Singapore remain on its watchlist.
Under US Treasury definitions, a currency manipulator is defined as a state with persistent, one-sided FX market interventions with net purchases of foreign currency conducted in 6 out of a 12-month review period and totalling 2% of GDP. Such economies should also have a current account surplus exceeding 2% of GDP and a bilateral trade surplus with the US exceeding US$20 billion ($26.6 billion) over the review period.
“By this definition, Switzerland, Taiwan and Vietnam would have qualified, but instead they have been placed under a less onerous regime of “enhanced engagement”,” note CGS-CIMB economists Michelle Chia, Lim Yee Ping and Terence Lee. Since 1988, only three countries have been labelled currency manipulators - China, Japan and Taiwan.
