India added to watchlist in US currency manipulation report

The Treasury Dept report was released late Friday

The semi-annual US Treasury Department report on currencies was released late Friday. No country was named as a currency manipulator but India was added to a watchlist that already includes China, Germany, Japan, South Korea and India.

The report itself is toothless. Trump and many influential Republicans campaigned heavily on naming China a currency manipulator but haven’t done it. Obama was the same and Switzerland openly manipulated its currency for years without consequences.

However this report might be an early sign that the trade dispute could open up a new front on India.

“India increased its purchases of foreign exchange over the first
three quarters of 2017. Despite a sharp drop-off in purchases in the
fourth quarter, net annual purchases of foreign exchange reached $56
billion in 2017, equivalent to 2.2 percent of GDP”.

“India has a significant bilateral goods trade surplus with the
United States, totaling $23 billion in 2017, but India’s current account
is in deficit at 1.5 percent of GDP and the exchange rate is not deemed
to be undervalued by the IMF,” the report said.

 “Given that Indian foreign exchange reserves are ample by common
metrics, and that India maintains some controls on both inbound and
outbound flows of private capital, further reserve accumulation does not
appear necessary.”

The report, titled ‘Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States’ is decent weekend reading.

Read it here.