78th US Secretary of the Treasury, Janet Yellen visited New Delhi and held talks with Finance Minister Nirmala Sitharaman. On her first visit to India, United States Treasury Secretary Janet Yellen quoted President Joe Biden, saying that India is an “indispensable partner to the United States”. The United States also took India off its Currency Monitoring List, along with Italy, Mexico, Thailand, and Vietnam. India had been on the Monitoring List for the last two years. India and four other countries were removed from the Monitoring List as they now only met one of the three criteria for two consecutive reports.
Speaking at the US-India Businesses and investment Opportunities event in New Delhi, Janet Yellen said that the US will be extending support to India’s presidency in G20 to achieve shared global priorities.
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The removal from US’ Currency Monitoring List) means that the Reserve Bank of India (RBI) can now take robust measures to manage the exchange rates effectively, without being tagged as a currency manipulator. This is a big win from a markets standpoint and also signifies the growing role of India in global growth.” To manage exchange rates amid the rupee fall, the RBI recently took actions like buying dollars at the time of excess inflows and selling dollars at the time of outflows. For India, it is good news as we were designated a currency manipulator. The rupee could appreciate on account of this.”
An economy meeting two of the three criteria in the Trade Facilitation and Trade Enforcement Act of 2015 is placed on the Watch List. Once a country meets all three criteria, it is labeled as a ‘currency manipulator’ by the US Department of Treasury. Once on the Monitoring List, an economy will remain there for at least two consecutive reports “to help ensure that any improvement in performance versus the criteria is durable and is not due to temporary factors”. This includes:
(1) A significant bilateral trade surplus with the United States is a goods and services trade surplus that is at least $15 billion
(2) A material current account surplus is one that is at least 3% of GDP, or a surplus for which Treasury estimates there is a material current account “gap” using Treasury’s Global Exchange Rate Assessment Framework (GERAF).
(3) Persistent, one-sided intervention occurs when net purchases of foreign currency are conducted repeatedly, in at least 8 out of 12 months, and these net purchases total at least 2% of an economy’s GDP over a 12-month period.
According to the report, these countries are presently on the list:
According to the report, China stands out among major economies due to its failure to disclose foreign exchange intervention and broader lack of transparency regarding important aspects of its exchange rate mechanism, which justifies the Treasury’s close monitoring.
A nation is regarded as a “currency manipulator” if it appears on the US Currency Monitoring List. The US government designates nations that use “unfair currency practices” to their advantage in international trade as currency manipulators.
Notably, Switzerland once again exceeded the thresholds for all three criteria, which is a parameter for being labelled as a “Currency Manipulator”. But the term was not used by the Report and the Treasury Department maintained that there is not enough evidence to use the label for Switzerland.
The Treasury will continue its enhanced bilateral engagement with Switzerland, which commenced in early 2021, to discuss the Swiss authorities’ policy options to address the underlying causes of its external imbalances, a media note said.
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