U.S. says Switzerland exceeds currency thresholds, no manipulator tag

The U.S. Treasury Department on Friday said Switzerland continued to exceed its thresholds for possible currency manipulation under a 2015 U.S. trade law, but refrained from branding it – or any other country – a currency manipulator.

The Treasury said it would continue an enhanced bilateral engagement with Switzerland that began in early 2021 to discuss Swiss authorities’ options to address the underlying causes of its external imbalances.

A senior Treasury official said those talks were going well, and Switzerland faced some unique challenges that affected its current account balance, including occasional safe haven inflows, such as at the start of Russia’s war against Ukraine.

Vietnam and Taiwan also continued to exceed some thresholds for possible currency manipulation, Treasury said in its semi-annual report, saying that it would continue an in-depth analysis of their exchange rate and macroeconomic policies.

Overall, the report concluded that no major trading partner manipulated its exchange rate with the U.S. dollar for purposes of preventing effective balance of payments adjustments or gaining unfair competitive advantage in international trade.

But it said it remained concerned about certain economies raising the scale and persistence of foreign exchange intervention to resist appreciation of their currencies in line with economic fundamentals, and would continue to press surplus countries to take steps to boost domestic demand.

Treasury Secretary Janet Yellen urged major U.S. trading partners to carefully calibrate their policy tools to support a strong, sustainable global recovery.

“An uneven global recovery is not a resilient recovery,” she said. “It intensifies inequality, exacerbates global imbalances, and heightens risks to the global economy.”

Treasury moved Taiwan and Vietnam to its “Monitoring List” of major trading partners that merit close attention to their currency practices, along with 10 other countries that remained on the list: China, Japan, South Korea, Germany, Italy, India, Malaysia, Singapore, Thailand and Mexico.

Treasury said it had engaged in “productive” discussions with Taiwan since May 2021 that had helped develop a common understanding of U.S. concerns, comments echoed by Taiwanese officials after the report was released.

A Taiwanese central bank official said the two sides had good communication, and Washington understood Taiwan’s exchange rate policy stance.

Treasury said it was satisfied with progress made by Vietnam under a July 2021 agreement to address U.S. concerns.

The report was issued within hours of Japan’s government and central bank issuing a joint statement flagging their concern about recent sharp falls in the yen, the strongest warning yet that Tokyo could intervene to support its currency.

The Treasury report took note of the sharp drop in Japan’s yen so far in 2022, saying it was largely due to interest rate differentials arising from the Bank of Japan’s continued accommodative monetary policy stance.

The report continued to voice concerns about China’s failure to publish foreign exchange intervention data and a broader lack of transparency about its exchange rate mechanism, saying Treasury would closely monitor the foreign exchange activities of China’s state-owned banks.