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30 May 2019


Thailand Not Added to US Currency Manipulation Watchlist, But at Risk of Trade Pressure (Current Issue No.2998)


           The US Department of Treasury issued the report on macroeconomic and foreign exchange policies of the US' major trade partners on May 28, 2019, which is about a month behind the original schedule. The report does not specifically label any country as a currency manipulator in order to bolster advantages of the US in trade. However, the US has revised the criteria/conditions of the report, resulting in changes on two important issues: 1) the number of the US' trade partners that has been included in the assessment increases to 21 countries, compared to 12 countries before; and, 2) the criteria on current trade surplus have been tightened. Thailand, however, has not been added to the US Monitoring List as previously feared. 

          KResearch has assessed that this is considered a good news for Thailand perhaps because the US Dollar was appreciating at the time when the report was prepared by the US Department of Treasure while Asian currencies were softening as a result of capital outflows and weakening economic conditions amid the trade war, forcing their central banks to sell foreign currencies (not the net buying side per the US criteria/conditions) so as to slow the depreciation of their currencies. Therefore, Thailand and other Asian countries (even Hong Kong, which pegs its currency to the US Dollar) do not meet the US criteria or conditions on foreign exchange market intervention or currency manipulation to allow their currencies to weaken on one side as stated in the report.   

             We view that this situation will not directly Thailand's trade, but since many ASEAN countries have been added to the US currency manipulation watchlish, this signals that Thailand is at risk of being closely watched in the future, given that Thailand's trade surplus with the US is leaning towards the criteria at USD20 billion.

              However, KResearch view that the US may put trade pressure on Thailand via the review of their GSP only and this will unlikely be upgraded to other forms of trade barrier because our production and exports do not violate any of the US criteria while this issue can be explained by the relevant Thai authorities. In addition, the acceleration of some Thai exports to the US has been caused mainly by adjustments in production chains of investors globally. Nevertheless, Thailand may need to seek new markets and enter into more free trade agree agreements in order to enhance long-term export and investment growth, going forward.