U.S. keeps S. Korea on list of countries to monitor for currency practices

The United States said Thursday (U.S. time) it is keeping South Korea on a list of countries to monitor for currency practices.

The U.S. Treasury Department published the decision in a semiannual report to Congress, which also placed ten other countries, including China, Japan and Germany, on its monitoring list of major trading partners that merit close attention to their currency practices. Ireland and Mexico were newly added to the list.

Vietnam and Switzerland were removed from the list of currency manipulators. They were instead named as partners that merit enhanced engagement, along with Taiwan.

“Treasury is working tirelessly to address efforts by foreign economies to artificially manipulate their currency values that put American workers at an unfair disadvantage,” Janet Yellen, Secretary of the Treasury, said in a press release.

The report said the U.S. reviewed 20 key trading partners on three criteria over a 12-month period. The criteria are net purchases of foreign currency that total at least 2 percent of an economy’s gross domestic product (GDP), a material current account surplus that is at least 2 percent of GDP and a bilateral trade surplus with the U.S. that is at least $20 billion.

The review concluded that Korea has met two of the three criteria in most reports over the past five years.

“Korea has met two of the three criteria in every report since April 2016 except for the May 2019 report, having a material current account surplus and a significant bilateral trade surplus with the U.S.”

“While Korea’s bilateral trade surplus with the U.S. briefly dipped below the threshold in 2018, it rose back above the threshold in 2019,” it added.

Specifically, the report noted that the Korean economy saw its current account surplus widen to 4.6 percent of GDP in 2020, up from 3.6 percent in 2019. Its bilateral goods trade surplus with the U.S. also rose to $25 billion last year from $21 billion in 2019.

The country’s net foreign exchange purchases, however, came in below the cited threshold.

“Korea reported net foreign exchange purchases of $5 billion (0.3 percent of GDP) in the spot market to stem won appreciation in 2020,” the report said.

“Treasury estimates that Korean authorities made sizeable foreign exchange purchases in the last four months of the year totaling $20 billion (1.3 percent of GDP), as the won appreciated 9.3 percent against the dollar over the same period,” it said, adding that currency intervention by authorities should be limited to “only exceptional circumstances of disorderly market conditions.”