Currency Wars

The US Treasury has added China, Germany, South Korea, Switzerland, Malaysia, Singapore, and Taiwan to its “watch list” for currency practices. The US Treasury report aims to put pressure on trading partners suspected of keeping exchange rates artificially low to gain a competitive advantage. However, the Ministry of Finance refrained from labelling any counterparty as a currency manipulator. Most of the foreign exchange intervention by the U.S. trading partners last year took the form of dollar selling, which led to the appreciation of their currencies. However, the Treasury confirmed that no major trading partner had manipulated exchange rates to gain an unfair advantage over the past four quarters.

Keeping an Eye on Major Partners


As a result, all major partners have been placed on a ‘watch list’, indicating the need for close monitoring of the macroeconomic policies and financial practices of these countries. China, a major trading partner of the United States, has been repeatedly criticised for not releasing reports on foreign exchange intervention, which has attracted the attention of the Treasury Department. The criteria for foreign exchange intervention are based on five parameters, and a trading partner must meet at least three criteria to be classified as a currency manipulator. If Switzerland meets any of these criteria, the Ministry of Finance will conduct a comprehensive analysis until Switzerland no longer meets any of these criteria.


 the Impact of Japan’s Intervention


The Japanese yen depreciated in 2022, and Japan intervened to ease the yen’s weakness, leading to increased scrutiny from the United States. Although designating a trading partner as a manipulator has no immediate effect, governments have a legal obligation to consult with trading partners on measures to eliminate exchange rate imbalances. Furthermore, if the label remains in place, it could be subject to penalties, including being excluded from public contracts after one year.

Transparency and its Impact on Forex Markets


The Ministry of Finance argues that the lack of transparency in the exchange rate mechanism makes China a special case among major economies requires close monitoring, and calls for greater transparency in China’s exchange rate policy operations. He emphasised the need for The release of this report is important for Forex traders and investors should keep an eye on the latest developments. The currency’s worth is impacted by various elements, such as inflation, interest rates, and trade policies.

Using Trends to Guide Your Forex Investments


Traders can use these trends to make informed investment decisions, especially in volatile markets like the foreign exchange market. In conclusion, the U.S. Treasury’s “Watch List” identifies China, Germany, South Korea, Malaysia, Singapore, Switzerland, and Taiwan as economies whose macroeconomic policies and financial practices merit close U.S. scrutiny. None of China’s major trading partners are known to be manipulators, but the Treasury Department is calling for greater transparency about how China conducts its currency policy. As a forex trader, it is essential to monitor developments in currency manipulation and foreign exchange interventions as they can affect exchange rates and exchange rates.