Taiwan pledges ongoing engagement with U.S. after currency report

06/11/2022 06:16 PM
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The central bank in Taipei. CNA file photo
The central bank in Taipei. CNA file photo

Taipei, June 11 (CNA) Taiwan's central bank on Saturday pledged to continue "enhanced engagement" with the U.S. after Washington placed Taipei on the monitoring list for currency manipulation in its latest semi-annual currency report.

In a statement, the Central Bank of the Republic of China (Taiwan) said the bank has conducted several rounds of talks with U.S. authorities on bilateral trade and currency issues since April 2021 and clearly expressed its stance on these issues.

Citing the latest currency report covering 2021, the central bank said the U.S. Treasury agreed that the "productive discussions have helped develop a common understanding of the policy issues related to Treasury's concerns about Taiwan's currency practices."

"Over the next year, the central bank will continue its enhanced engagement with the U.S. on the currency issues," the bank said, but did not comment further on Taiwan's performance on specific thresholds cited in the report.

On Friday, the U.S. Treasury released its latest semi-annual currency report in which Taiwan and Vietnam were placed on a list of countries being monitored for currency manipulation.

The United States uses three thresholds to determine currency manipulation: a bilateral goods and service trade surplus of at least US$15 billion, a current account surplus equivalent to 3 percent of GDP, and persistent, one-sided foreign-exchange interventions worth at least 2 percent of GDP.

According to the report, Taiwan's bilateral trade surplus with the U.S. and current account surplus both were above the manipulation thresholds over the four quarters of 2021.

Taiwan recorded a US$40 billion bilateral goods trade surplus with the U.S. in 2021, up from US$28 billion in 2020, and had a current account surplus of US$115 billion (14.8 percent of GDP) in 2021, the report said.

Taiwan was not cited, however, for excessive foreign exchange interventions in 2021, when the Taiwan dollar appreciated for a third straight year against the U.S. dollar, by 2.95 percent.

Analysts said the central bank stepped in during most forex trading sessions in 2021 to limit the Taiwan dollar's gains, but the central bank never admitted to intervening, saying only that it had a responsibility to fight volatility and maintain market stability.

In its statement Saturday, it simply agreed with the report's position that it did not violate the forex intervention threshold.

This year, however, as the Taiwan dollar has weakened against the greenback because of U.S. Federal Reserve rate hikes to fight inflation, the central bank has stepped in to slow down the local currency's depreciation, especially in March and April, and admitted to doing so.

That could have repercussions for future reports and Taiwan's efforts to not be labeled as a currency manipulator.

The Taiwan dollar has fallen about 6.8 percent against the U.S. dollar so far this year.

The U.S. report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States released Friday reviewed and assessed the policies of major U.S. trading partners, comprising roughly 80 percent of U.S. foreign trade in goods and services.

(By Tseng Chih-yi, Shin Shiu-chuan and Frances Huang)

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