US Treasury report clears Japan of FX manipulation, but says will monitor them

This from the US Treasury twice yearly currency manipulation report

  • Found that no major US trading partner manipulated currency to gain
    unfair trade advantage in four quarters through December 2023
  • Found no major
    trading partner met criteria for enhanced analysis in four quarters
    ending December 2023
  • Monitoring list of
    trading partners whose currency practices ‘merit close attention’
    includes China, Japan, Malaysia, Singapore, Taiwan, Vietnam, and
  • Foreign exchange
    report reiterates call for increased currency transparency from China
  • China’s failure to
    publish forex intervention and lack of exchange rate policy
    transparency make China an ‘outlier,’ warrant close monitoring
  • Biden administration
    strongly opposes attempts by trading partners to manipulate currency
    values to gain unfair advantage over US workers
  • Japan intervened in
    currency market in April and May 2024 to buy yen, sell dollars,
    strengthening yen’s value
  • Japan is transparent
    on foreign exchange interventions
  • Expects intervention
    in large markets to be reserved for very exceptional circumstances
    with appropriate prior consultations
  • China has used daily
    yuan fix rate over the past year to prevent weakening of yuan,
    without official explanation
  • Japan, Taiwan,
    Vietnam, Germany on monitoring list due to significant bilateral us
    trade surplus and material global current account surplus
  • Japan’s recent
    currency market interventions were not a factor in adding japan to
    forex report monitoring list
  • Forex report raises
    questions on the accuracy of Chinese data on current account balance

The comments on China are interesting but there is nothing new there. China manages its currency. If you are not familiar with the Asia time zone every day I post where the People’s Bank of China sets its CNY reference rate. Traders are permitted to trade USD/CNY only within a +/- 2% band from the reference rate. If USD/CNY moves outside of this band the PBoC will intervene to bring it back within the band. CNY is is the ‘onshore’ yuan. There is also CNH, the offshore yuan. There are not limits applied to this. Its free to move outside +/- 2%, and it does, but it never strays too far from USD/CNY.

As for how the PBoC set the reference rate each day, this where there is no transparency. They have a “counter-cyclical factor”

This article was written by Eamonn Sheridan at Source