India has been removed from the United States ‘currency manipulation’ monitoring list. The US Treasury said the ‘monitoring list’ includes those ‘major trading partners that merit close attention to their currency practices’. China, Japan, South Korea, Switzerland and Germany were also on the list.
The US had added India to its ‘monitoring list’ in 2017 for ‘questionable foreign exchange policies’. It had stated that India had increased its purchases of foreign exchange over the last three quarters of 2017, although the rupee still rose in value.
In its semi-annual report, the US Treasury said that net purchases of foreign exchange over 2017 as a whole totalled $56 billion (2.2% of GDP), including activity in the forward market. “The intervention has been increased citing strong capital inflows, with foreign direct investment (FDI) of $34 billion and foreign portfolio flows of $26 billion over the first three quarters of the year.”
The Secretary of the US Treasury, Steven Mnuchin had said in a statement that they will continue to monitor and combat unfair currency practices, and encourage policies and reforms to address large trade imbalances. Sources say the Treasury report is required by Congress to identify countries that are trying to artificially manage the value of their currency to gain a trade advantage, for example by keeping the exchange rate low to promote cheaper exports.