US examines Swiss monetary practices

WASHINGTON — The Treasury Department said Friday it was concerned that some United States trading partners were taking steps to weaken their currency and gain unfair trade advantages against the United States — but declined to qualify any currency manipulator country.

In its semi-annual foreign exchange report, the Treasury Department named Switzerland, which in 2020 was seen as a manipulator, as the worst offender and said it was closely monitoring the foreign exchange practices of Taiwan and Vietnam. Treasury Department officials have been involved in “enhanced bilateral engagement” with the three countries in recent months.

“The administration continues to advocate strongly for our major trading partners to carefully calibrate policy tools to support a strong and sustainable global recovery,” Treasury Secretary Janet L. Yellen said in a statement. “An uneven global recovery is not a resilient recovery.”

The United States has three sets of thresholds that it uses to determine if a country is weakening the value of its currency. It has wide discretion to determine whether a country manipulates the exchange rate between its currency and the dollar to gain a competitive advantage in international trade.

A government can remove the value of its currency by selling it in foreign exchange markets and hoarding dollars. By lowering the value of its own currency, a country can make its exports cheaper and more competitive to sell in world markets.

The Trump administration called Switzerland and Vietnam currency manipulators in 2020, but the Biden administration, seeking a more diplomatic approach, removed the designation.

A Treasury official said the United States had had constructive talks with Switzerland over the past year, noting that its economy faced unusual factors as it was a small, open European economy with a currency, the franc, considered a safe haven.

Currency manipulation tags are meant to trigger talks with the United States and may involve input from the International Monetary Fund. If the Treasury Department’s concerns are not resolved, the United States could impose a series of sanctions, including tariffs.

Mark Sobel, chairman of the Official Monetary and Financial Institutions Forum, noted that the most pressing issue in global currency markets was the strength of the dollar.

“The real issue these days is the sharp appreciation of the dollar, which has clearly been generated by divergences in monetary policy between a tightening Fed and others that are less aggressive,” Sobel said. “It would be hard to blame others.”

The United States has added Vietnam and Taiwan to its currency “watch lists,” a tally that includes China, Japan, Korea, Germany, Italy, India, Malaysia, Singapore, Thailand and Mexico.

The Treasury Department said it was closely monitoring the foreign exchange activities of China’s state-owned banks. He criticized China for providing “very limited transparency” about how it manages its currency.

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