Washington-- The U.S. Department of Treasury has kept Taiwan on its currency monitoring list after Washington released its latest twice-a-year foreign exchange policy report on Friday.
It was the third time for Taiwan to be placed on the currency monitoring list since the United States started to publish such a report in April 2016. However, the U.S. Treasury States did not name Taiwan as a currency manipulation nation in the report.
Taiwan's Central Bank said Saturday that the results have been anticipated by the bank so the latest U.S. currency report is unlikely to impose any material adverse impact on the local foreign exchange market.
Harry Yen (???), head of the local central bank's foreign exchange department, said that the bank has established an effective communication channel with the U.S. Treasury and will express its opinions about the department's concerns over the New Taiwan dollar and U.S. dollar exchange rate.
In addition to Taiwan, the U.S. Treasury has also placed China, Japan, South Korea, Germany and Switzerland on the list. Like Taiwan, none of the five were named as currency manipulators by the U.S.
The U.S. Treasury releases the Report on Foreign Exchange Policies of Major Trading Partners of the United States in a bid to implement the new provisions of the Trade Facilitation and Trade Enforcement Act of 2015, also known as the Customs Bill. The provisions of the Customs Bill provide the U.S. government with new monitoring tools and measures to address unfair currency practices.
The report uses three criteria to determine which of its trading partners will be named as a currency manipulator nation. The three are: a significant bilateral trade surplus with the U.S.; a material current account surplus; and the involvement in persistent one-sided intervention in the foreign exchange market.
According to the central bank, Taiwan only met one of the three criteria in the latest report as Taipei still enjoyed a large current account surplus, but did not meet the criterion which accused a trading partner of persistent one-sided currency intervention. In the previous report, Taiwan met both of the criteria.
Market analysts said that recently Taiwan's central bank did not jump into the trading floor during late trading sessions as it had done regularly in the past to keep the Taiwan dollar cheaper. That's why the U.S. Treasury did not accuse Taiwan of persistent one-sided intervention.
Since the central bank was reluctant to intervene in recent sessions, the Taiwan dollar appreciated more than 6 percent against the greenback in the first quarter of this year, which sparked an outcry from exports-oriented firms, particularly those in the high-tech sector which had incurred large foreign exchange losses in the three-month period.
Only when Taiwan meets just one of the three criteria for two U.S. currency reports in a row, it will be removed from the monitoring list, the central bank said.
But it is not easy for Taiwan to be removed from the monitoring list since the country is a small scale and open economy which tends to post a large current account surplus, the central bank said.
Source: Focus Taiwan News Channel