Mitul Kotecha, Senior Emerging Markets Strategist at TD Securities, suggests that nervousness over the upcoming US Treasury semi-annual FX report has grown, with Trump once again accusing China of manipulating its currency.
“We examine the same criteria as the US Treasury and find that while various countries in Asia breached two of their thresholds, none is likely to be labelled as a currency manipulator.”
“China’s bilateral trade surplus with the US continues to grow, yet its current account surplus is shrinking and its FX intervention has been limited on aggregate.”
“Thailand and Taiwan come closest to breaching all three criteria, the latter coming very close indeed.”
“Although India was added to the Monitoring list in April 2018 it escapes from being labeled as a manipulator, largely due to its current account deficit.”
“We expect the outcome of the Report to be received with some relief in Asia, particularly in China. Nonetheless, any relief will likely be limited.”