hankyoreh

Monitors at Hana Bank’s dealing room in central Seoul show KOSPI and exchange rate figures on Nov. 3. (Yonhap)

South Korea has been pulled from the US Department of the Treasury’s list of countries that are monitored for suspicious exchange rate behavior, the first time it has been off the list in seven years.

“Six economies are on Treasury’s ‘Monitoring List’ of major trading partners that merit close attention to their currency practices and macroeconomic policies: China, Germany, Malaysia, Singapore, Taiwan, and Vietnam,” the US Treasury Department said in a press release Tuesday announcing the release of its semiannual “Report to Congress on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States.”

Under the Omnibus Trade and Competitiveness Act of 1988 and the Trade Facilitation and Trade Enforcement Act of 2015, the US Treasury Department has been required since 2015 to submit a report assessing the exchange rate policies of the US’ 20 biggest trading partners to Congress twice a year. The report aims to keep other countries from artificially depreciating their currencies to boost exports to the US.

Any country that meets all three of the criteria stipulated under the Trade Facilitation and Trade Enforcement Act is categorized as requiring “enhanced analysis,” which amounts to being regarded as a currency manipulator. The three criteria are as follows: a surplus of US$15 billion or more in trade with the US, a current account surplus of at least 3% of gross domestic product, and net foreign purchases worth at least 2% of GDP (in eight or more months of a 12-month period).

Countries regarded as needing enhanced analysis can face various sanctions, following deliberations in the US government, which include blocking US companies that invest in those countries from receiving financial assistance or from participating in the US federal government’s procurement market. The US may also decide to exert exchange rate pressure through the International Monetary Fund.

A country that only meets two of the three criteria is placed on the US Treasury Department’s monitoring list. According to the latest report, South Korea only met one of the three criteria (a trade surplus with the US) for two reporting periods, leading to its removal from the monitoring list along with Switzerland.

Korea’s removal comes seven years after it was first designated for monitoring in April 2016. The same report added Vietnam to the monitoring list.

“Treasury found that no major trading partner met all three criteria for enhanced analysis under the Trade Facilitation and Trade Enforcement Act of 2015 during the four quarters ending June 2023,” the US Treasury Department said in its press release.

“China’s failure to publish foreign exchange intervention and broader lack of transparency around key features of its exchange rate mechanism [. . .] warrant Treasury’s close monitoring,” the department added.

By Park Jong-o, staff reporter

Please direct questions or comments to [english@hani.co.kr]