US keeps Taiwan on currency watchlist

MANIPULATION:
Taiwan remains on the list because it had a high trade surplus and its current account surplus was about 13.3 percent of GDP last year, the central bank said

• Staff writer, with CNA, Washington

The US Department of the Treasury has kept Taiwan on a watchlist of currency manipulators in its semiannual Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the US report.

The report, presented to the US Congress on Friday, reviewed and assessed the policies of major US trading partners, which accounted for about 80 percent of US foreign trade in goods and services, during the four quarters through December last year.

In addition to Taiwan, China, Germany, Malaysia, Singapore, South Korea and Switzerland have also been placed on the currency manipulation watchlist, the US Treasury said.

Photo: CNA

None of Washington’s major trading partners were named as a currency manipulator, it said.

The report uses three criteria to determine which of its trading partners would be named as currency manipulator nations: a significant bilateral trade surplus with the US; a material current account surplus; and involvement in persistent one-sided intervention in the foreign exchange market.

When an economy meets just one of the three criteria for two US currency reports in a row, it is removed from the monitoring list.

The central bank on Saturday said that although Taipei has stayed on Washington’s monitoring list for currency manipulation, both sides have channels to maintain smooth communications.

Taiwan remained on the watchlist because it has a trade surplus of US$51 billion in merchandise and services, and its current account surplus made up 13.3 percent of its GDP during the four quarters through the end of last year, the central bank said.

However, the central bank sold a net US$13 billion from its US dollar reserves, which made up about 1.7 percent of Taiwan’s GDP, and the number of months that the central bank was a net buyer of US dollars was fewer than eight, which did not meet the third criterium of persistent one-sided intervention in the foreign exchange market.

The central bank said it would continue to interact with the US Treasury.

It is unnecessary for Taiwan to worry about bilateral ties with the US just because Taipei was kept on the currency manipulation monitoring list, Taiwan Institute of Economic Research economist Wu Meng-tao (吳孟道) said.

As Taipei and Washington signed their first agreement under the US-Taiwan Initiative on 21st-Century Trade on June 1, which covered customs and border procedures, regulatory practices and small business in a bid to make trade and investment between the two sides easier, Wu said the US Treasury’s move to keep Taiwan on the currency manipulation watchlist is not expected to affect bilateral trade ties.

However, as the US Federal Reserve last week signaled more interest rate hikes before the end of the year, which could continue to boost the US dollar, influence fund flows and affect global financial markets, it is likely to prompt intervention from Taiwan’s central bank in the currency market, Wu said.