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Designation as a currency manipulator by the US carries no immediate and specific penalties at present. However, it requires bilateral engagement on exchange-rate policies, and can influence foreign-exchange markets by signalling US disquiet over currency practices.

Currency Frictions Pose Limited Macro Risk for Asian Sovereigns
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Fitch Ratings expects the Biden administration to downplay tensions over exchange-rate policies with trade partners in Asia, due in part to geopolitical considerations, even though some are on - or at risk of being placed on - the US Treasury’s currency manipulator list. In our view, the Biden administration’s approach should limit the risk of currency tensions resulting in US retaliation that would damage prospects for exports and economic growth in the region.
The US Treasury, in its last report considering whether countries manipulate their exchange rates in order to prevent balance-of-payments adjustments or to gain unfair trade advantages, published in December 2020 under the Trump administration, listed Vietnam and Switzerland as currency manipulators. Other Asian countries that did not meet all of the criteria to be judged currency manipulators, but featured on the Treasury’s monitoring list included China, Japan, South Korea, Singapore, Malaysia, Taiwan, Thailand and India. India and Singapore were judged to have intervened in the foreign-exchange market in a sustained, asymmetrical fashion.
Designation as a currency manipulator by the US carries no immediate and specific penalties at present. However, it requires bilateral engagement on exchange-rate policies, and can influence foreign-exchange markets by signalling US disquiet over currency practices. 
There is also a risk that new rules could be introduced, particularly if trade tensions escalate. Under President Trump, the Department of Commerce in May 2019 proposed a measure that would have allowed penalties to be applied to countries that supported exports through undervaluing their currencies, although this was not taken forward.
The Biden administration has so far maintained the Trump administration’s tough stance on China-related trade issues, but we believe that it will adopt a less confrontational approach with other trade partners in Asia, as it has signalled a preference for multilateral approaches to lingering economic tensions.
Nonetheless, foreign-exchange reserves among the Asian economies listed in the last Treasury report rose rapidly in the 12 months to December 2020, the date likely to serve as the cut-off for monitoring in the next report. 
Rising foreign-exchange reserves can reflect many factors, including valuation adjustments, and may be driven by various motivations, but the trend may be perceived as evidence of official efforts to prevent balance-of-payments adjustments.
Fitch expects the US government’s stimulus to spur domestic economic growth and accelerate US imports, which may widen its bilateral deficits in the near term with some trading partners in Asia, particularly those where domestic demand continues to be held back by Covid-19-related effects. Higher trade surpluses could lead to further accumulation of foreign-exchange reserves if authorities resist appreciation pressures on their currencies, but the effect may be offset by capital outflows, for example if rising US Treasury yields attract capital from Asian markets.
If currency frictions between the US and its Asian trade partners were to deviate from our baseline assumption by escalating, Vietnam and Singapore could be the most exposed to macroeconomic risks among the Asian countries mentioned in the latest US treasury report. Their economies are heavily export-oriented, and their exports to the US are a substantial proportion of the total. Nonetheless, Singapore’s exchange-rate-based approach to monetary policy is well established, so we believe risks are lower in its case. Exposures in China, India and Japan would be more limited than in the other listed Asian markets, as goods exports are less of a driver of GDP in these countries.

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