Korea was removed from the U.S. Treasury Department’s exchange rate monitoring list for the first time in seven years since 2016. Analysis suggests that this is due to the recent slowdown in the current account balance. Experts predicted that it would have a positive impact on improving Korea’s external credibility and attracting foreign investment.
The U.S. Treasury Department announced in its exchange rate report released on the 7th (local time) that it had excluded Korea and Switzerland from the countries subject to exchange rate monitoring. In accordance with the Trade Promotion Act (2015), the United States evaluates the exchange rate policies of the top 20 countries in terms of trade volume with the United States and designates them as countries subject to in-depth analysis or observation. This means that we will examine whether these countries are benefiting greatly from trade with the United States by manipulating their exchange rates.
If all three conditions are met, including a trade surplus with the U.S. of more than $15 billion, a current account surplus exceeding 3% of gross domestic product (GDP), and dollar net purchases exceeding 2% of GDP for 8 months out of 12, the Deep Analysis Bureau, only 2 are eligible. If so, it is classified as a country subject to observation.
From the time the report was published in June of this year, Korea was excluded from the list of countries subject to observation because it only met the conditions for trade balance and did not meet the conditions for current account balance and foreign exchange market intervention.
Ahn Seong-bae, chief economist at the Korea Institute for International Economic Policy (KIEP), said, “Korea has moved further away from the risk of being designated as a currency manipulator,” and added, “The probability of a trade conflict with the United States has also decreased.” Seok Byeong-hoon, a professor of economics at Ewha Womans University, said, “By increasing Korea’s external credibility, it can have a positive effect on attracting foreign investment and exports.” A Bank of Korea official said, “It is meaningful in that it has been recognized that Korea’s foreign exchange policy and exchange rate are determined transparently.” However, there are also predictions that if export recovery continues, the country may be re-designated as an observation target country.
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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.