Thailand emerged high on Donald Trump’s trade offensive list, meeting all three criteria in the upcoming currency report used by the US president, according to regional analysts.
The criteria are the size of trade surplus with the US, magnitude of current-account surplus relative to the economy, and degree of net purchases of foreign currencies.
Whether Thailand will be put on the watch list, however, depends on whether the US would stick to the criteria or the focus is primarily on China, analysts say.
While Mr Trump threatened on the campaign trail to brand China a manipulator of its exchange rate once in the White House, the US Treasury’s semiannual currency reports failed to name any such violators in 2017.
But the next release, expected this month, comes in the wake of a series of tariff announcements by the administration, as Mr Trump seeks to deliver on promises of action to cut a widening trade deficit.
A more bellicose report could put appreciation pressure on those currencies singled out; China, Japan, South Korea, Germany and Switzerland were on the monitoring list in October, with India also being closely watched.
“This report takes on added significance given the lurch towards protectionism and tariffs,” said Dwyfor Evans, the Hong Kong-based head of Asia-Pacific macro strategy at State Street Global Markets.
“It will be interesting to see whether the US Treasury sees fit to single out Thailand or whether the trade focus is squarely a Chinese issue, as seems to be the case at this time.”
Taiwan was taken off the monitoring list in October, while the US and South Korea are working on a currency agreement to “prohibit competitive devaluation and exchange-rate manipulation”, the US Trade Representative’s office said in a statement last month.
South Korea and India are among a handful of nations that cut their trade surpluses with the US last year.
Malaysia and Thailand have been identified as countries at risk of being added to the monitoring list, although gains in their currencies could leave them less exposed.
The Bank of Thailand’s foreign-exchange operations “are never intended for Thailand to gain an unfair competitive advantage over trading partners,” assistant governor Chantavarn Sucharitakul said in a written response to questions.
Here’s what analysts are watching for in the report, which has sometimes come with delayed release dates from the Treasury.
Capital Economics Ltd
Gareth Leather, senior Asia economist, and Krystal Tan, Asia economist
“The upcoming US Treasury report will be the next test of Trump’s intentions,” Mr Leather and Ms Tan write in a note. “The decision is likely to be as much a political as an economic one, and is not a foregone conclusion”
“The act of officially labelling China or anywhere else in Asia a currency manipulator would represent a significant ratcheting up of tensions”
“Taiwan, Korea, Hong Kong, Singapore and Malaysia meet two of the three criteria, but Thailand is the only country in the region that meets all three.”
Mitsubishi UFJ Kokusai Asset Management Co
Takahide Irimura, head of economic research
“If they use stronger — or stricter-than-usual — language in the report, that may give the impression that the US prefers a weaker dollar, weighing on the dollar and boosting Asian currencies.”
“Thailand seems to have intervened quite aggressively, thinking that the US may not care so much about a small country. So, if they are added to the watchlist, there would be speculation it would be harder for them to intervene, and that would add appreciation pressure to the baht” – Bangkok Post
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