Korea exceeds the standard for the second time in a row since the first half of this year
Vietnam, China, Germany, etc. are included in the countries subject to exchange rate monitoring.
On the 7th (local time), the U.S. Treasury excluded Korea from the list of countries subject to exchange rate monitoring for the first time in seven years since April 2016.
According to foreign media such as Yahoo Finance and Reuters, the U.S. Treasury excluded Korea and Switzerland from the countries subject to exchange rate observation through its exchange rate report for the second half of 2023.
On the other hand, Vietnam, China, Germany, Malaysia, Singapore, and Taiwan were included in the list of countries subject to exchange rate monitoring.
The Ministry of Finance announced that Vietnam was newly included in the list of countries subject to exchange rate monitoring because its global current account surplus exceeded the standard during the monitoring period. China explained that it remained on the list of countries subject to exchange rate monitoring due to a lack of transparency in its foreign exchange practices. Both China and Vietnam have large trade surpluses with the United States.
The reason the U.S. Treasury excluded Korea from the list of countries subject to exchange rate monitoring is because it deviated from the standard for the second time in a row.
Based on the Trade Promotion Act of 2015, the U.S. Treasury publishes a report on the economy and exchange rate policies of trading partners every half year, and categorizes countries with a high risk of exchange rate manipulation into ‘exchange rate monitoring countries’ and ‘exchange rate in-depth analysis bureau’. The criteria are ▲foreign exchange market intervention (foreign exchange net purchases exceeding 2% of GDP and net purchases for 8 months, etc.) ▲current account surplus (exceeding 2% of GDP or current account gap 1%) ▲trade surplus with the US (over $15 billion) There are three.
If two of these apply, it is designated as an ‘exchange rate observation country’, and if all three apply, it is designated as an ‘exchange rate analysis bureau’. If it falls under the ‘In-depth Currency Analysis Bureau’, it may be designated as a ‘Currency Manipulation Bureau’ by the U.S. Treasury. In this case, measures such as restrictions on investment by U.S. companies, government procurement bidding, and restrictions on development funds will be imposed.
There are no separate sanctions against ‘exchange rate monitoring countries’. However, as there are concerns about being named in the ‘In-depth Exchange Rate Analysis Bureau’, it is inevitable that it will be passive in intervening in the foreign exchange market when exchange rate volatility increases.
From April 2016 to the first half of 2019, Korea has been included in the ‘exchange rate monitoring country’ every time. In addition to the first half of 2019, which only met one criterion, Korea has so far been met with two criteria, including a trade surplus with the US and a current account surplus relative to GDP.
However, in a report for the first half of this year, it was predicted that Korea could be excluded from the list of countries subject to exchange rate monitoring as Korea’s trade surplus with the US (USD 37 billion) met only one criterion of exceeding USD 15 billion. However, it continued to be included in the exchange rate monitoring countries due to the condition that it must meet the exclusion criteria two consecutive times.
Afterwards, the U.S. Treasury Department announced in its report for the second half of this year that Korea was excluded from the list of countries subject to exchange rate monitoring as only the trade surplus with the U.S. ($38 billion) was included among the three criteria.
Source: Donga
Mark Jones is a world traveler and journalist for News Rebeat. With a curious mind and a love of adventure, Mark brings a unique perspective to the latest global events and provides in-depth and thought-provoking coverage of the world at large.