What is the US’ Currency Monitoring List and why was India removed

The ninth India-US economic and financial partnership meeting came just ahead of India assuming G20 Presidency.

What is the US’ Currency Monitoring List?

The US Department of Treasury on Thursday delivered its semiannual Report to Congress on ‘Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States’. The report reviews the policies of the US’ trading partners during the last four quarters ending in June 2022.

The report also includes a review of the Treasury’s ‘Monitoring List’. As its name suggests, the list closely monitors the currency practices and policies of some of the US’ major trade partners.

The report states that economies that meet two or three criteria in the 2015 Act are placed on the list. Under this legislation, the Treasury Department has to assess the macroeconomic and exchange rate policies of the US’ trading partners for three specific criteria:

(1) A significant bilateral trade surplus with the United States is a goods and services trade surplus that is at least $15 billion
(2) A material current account surplus is one that is at least 3% of GDP, or a surplus for which Treasury estimates there is a material current account “gap” using Treasury’s Global Exchange Rate Assessment Framework (GERAF).
(3) Persistent, one-sided intervention occurs when net purchases of foreign currency are conducted repeatedly, in at least 8 out of 12 months, and these net purchases total at least 2% of an economy’s GDP over a 12-month period.

Once on the list, an economy will remain there for at least two consecutive reports so that the Treasury can assess whether any improvements in performance is durable and not due to temporary factors.

Which countries are on the US’ currency monitoring list?

According to the report, these countries are presently on the list:

– China
– Japan
– Korea
– Germany
– Malaysia
– Singapore
– Taiwan

So why was India removed from the list?

India and four other countries were removed from the Monitoring List as they now only met one of the three criteria for two consecutive reports. India has been on the list for about two years.

In its report, the Treasury Department explained why China still remained on the list. “China’s failure to publish foreign exchange intervention and broader lack of transparency around key features of its exchange rate mechanism makes it an outlier among major economies and warrants Treasury’s close monitoring,” the report stated.