US retains M’sia on currency manipulation watch list

PETALING JAYA: The US government has kept Malaysia in the currency manipulation watch list, along with Singapore, Vietnam and four other countries.

Malaysia, which was included in the semi-annual list in May 2019, however made some progress after it only met one out of three criteria set by the US Treasury, compared to two criteria in the previous report.

The country could be removed from the next list by year-end if it again meets a maximum of one criteria. This, however, seems unlikely as it means that Malaysia will have to slash its trade surplus with the United States by about two-thirds from current levels.

The US Treasury said Malaysia will remain on the monitoring list until “it meets fewer than two criteria for two reports in a row”.Singapore and Vietnam both met two out of the three criteria. The other countries were China, Taiwan, Germany, and the new entrant, Japan.

For context, the watch list issued on June 20 reviewed the 20 largest US trading partners based on three criteria over the four quarters ending Dec 2023.

These were, namely, a significant bilateral trade surplus with the United States is a goods and services trade surplus that is at least US$15bil and a material current account surplus is one that is at least 3% of gross domestic product (GDP).

The third criterion was persistent, one-sided intervention occurs when net purchases of foreign currency are conducted repeatedly, in at least eight out of 12 months, and these net purchases total at least 2% of an economy’s GDP over a 12-month period.

The US Treasury retained Malaysia on the watch list for having a “significant bilateral trade surplus with the United States”.

It is noteworthy that Malaysia’s goods and services trade surplus with the United States fell to US$25bil (RM117.7bil) for the four quarters through December 2023.

The US Treasury expects Malaysia to have less than US$15bil in trade surplus, which is a reduction of almost 67%.

An analyst told StarBiz it is unfair to put Malaysia on the watch list as it may create a negative impression on Bank Negara and its foreign exchange rate management.

“It is not the fault of Malaysia that American manufacturers import in huge value from the former. It is all about competitiveness and cost attractiveness.

“The US Treasury should reconsider its one-sided criteria,” said the analyst.