INR May Rise As US Puts India Back on Currency Watch List

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INR may rise as US puts India back on currency watch list TIMES NEWS NETWORK Mumbai: The US has for the third time placed India on its currency manipulator watch list after the RBI’s relentless dollar purchase that resulted in forex reserves rising by $100 billion this fiscal. The move was disclosed in the US Treasury’s semi-annual currency manipulation report. It labelled Switzerland and Vietnam as currency manipulators, and added Taiwan, Thailand and India to the seven others already in the watch list. The threat of a manipulator tag comes even as India has been arguing that its intervention is only to manage the tidal wave of capital flows triggered by actions of central banks like the US Fed. RBI governor Shaktikanta Das had last year called for greater understanding on the need for reserves rather than stigmatising countries with a ‘manipulator’ tag. Das had also indicated that such actions might prompt emerging markets to move away from the dollar as a reserve currency. India had been removed from the watch list last year. According to bankers, the tag could lead to the rupee appreciating as the RBI might step back from its dollar purchases. “I hope this triggers a rethink in the central bank’s forex intervention strategy, particularly considering that reserves were already enough to cover more than a year’s imports when they were at $500 billion,” said DBS India head (treasury) Ashish Vaidya. He pointed out that India is one of the few countries that continues to build dollar reserves post-2015, thereby funding US growth. “Holding either the currency or rates for too long can cause imbalances like the one at hand where sterilisation of dollar inflows has resulted in the creation of rupee liquidity and the consequent need to mop up the surplus,” said Vaidya. .

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The US Determines Vietnam and Switzerland As Currency Manipulators
2021.1.18 (nle2021.1) The US Determines Vietnam and Switzerland as Currency Manipulators The December 2020 Treasury Report on Macroeconomic and Foreign Exchange Policies of Major Trading partners of the United States Masashi Hashimoto Senior Economist [email protected] Economic Research Department Institute for International Monetary Affairs (IIMA) ＜Summary＞ ➢ The US Department of Treasury, in its Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States (hereinafter referred to as the FX Report or the Report) released in December 2020, concluded Vietnam and Switzerland as currency manipulators and newly added Thailand, Taiwan and India to the Monitoring countries list. ➢ The dollar continued to depreciate in the backdrop of sharp deterioration of the world economy, which tended to strengthen the inclination of the US trading partners to rely to foreign demands to support their economies by offsetting the appreciation pressure on their currencies against the US dollar by market interventions. It is likely that this has increased the number of cases where countries fall under the conditions of a currency manipulator. ➢ Essentially, it is desirable that the Report diagnoses and encourages to correct the distortions of economic policies of the US trading partner countries by examining their international imbalances as symptoms of the distortions, thus trying to realize sustainable growth of both the United States and its trading partners. Therefore, it is expected that under the next administration of president-elect Mr. Biden who emphasizes an international cooperation the Report is used for purpose of correcting the policy distortions not only of the U.S.
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