Second, it has relatively low foreign exchange reserves net of external public debt. Vietnam does not meet two of the Bergsten and Gagnon criteria: First, it is a lower-middle-income country according to the World Bank, whereas Bergsten and Gagnon focus only on upper-income and upper-middle-income countries.
Switzerland and Taiwan met the Bergsten and Gagnon criteria in 2020 ( see this post), and they have been some of the largest and most frequent manipulators in past years.
#Us treasury exchange rates 2020 free#
This requirement has no economic justification and grants a free pass to Singapore, which was the most active manipulator in 2020 on the more economically sound criteria proposed by Bergsten and Gagnon in 2017. A previous post discussed concerns with Treasury's criteria, most notably the requirement that a country have a large bilateral trade surplus with the United States. Treasury has established three criteria for gauging whether large-scale official currency purchases should be considered currency manipulation: persistent net official purchases of foreign currency (more than 2 percent of GDP), a material trade (current account) surplus (more than 2 percent of GDP), and a significant bilateral trade surplus with the United States (more than $20 billion per year). The US current account deficit widened by $166 billion in 2020 a significant fraction of that widening is likely attributable to the increase in foreign currency manipulation last year.Īt her confirmation hearing in January 2021, Secretary Yellen said, "the intentional targeting of exchange rates to gain commercial advantage is unacceptable," and that she would "oppose any and all attempts by foreign countries to artificially manipulate currency values to gain an unfair advantage in trade." 1 For countries that already have an excessive trade surplus, such behavior constitutes currency manipulation. The reason to do that is to maintain competitive prices for one's exports and prevent a flood of imports.
When countries have more than adequate levels of foreign exchange reserves, the only purpose of acquiring further reserves is to hold down the exchange value of the domestic currency. Nevertheless, Treasury declared that it had "insufficient evidence" to judge whether large-scale currency purchases by these countries were intended to support their excessive trade surpluses.
As noted in a previous post, currency manipulation jumped dramatically to nearly $450 billion in 2020, and Treasury's own criteria point to at least three manipulators last year: Switzerland, Taiwan, and Vietnam. Despite Secretary Janet Yellen's promise to take a hard line against currency manipulation, the US Treasury Department declined to name any country a currency manipulator in its latest report on April 16.
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