Current affat diary 20/12/2020

Subject: Economy

Currency manipulator

√Recently, the US treasury has placed India on its currency manipulator watch list.

√Vietnam and Switzerland have been labelled as currency manipulators.

√USA lists those countries which it feels are engaging in unfair currency practices by deliberately devaluing their currency against the dollar.

√The US Department of Treasury releases the semi-annual report where it has to track developments in international economies and inspect foreign exchange rates.

√Lowering the value of its currency provides an unfair advantage to that particular country over others.

√This is because the devaluation would reduce the cost of exports from that country and artificially show a reduction in trade deficits as a result.

√A country which meets two of the three criteria of the Trade Facilitation and Trade Enforcement Act of 2015 is placed on the Watch List. This includes:
(1) A significant bilateral trade surplus with the US which is at least USD 20 billion over a 12-month period;
(2) A material current account surplus equivalent to at least 2% of GDP over a 12-month period;
(3) Persistent one-sided in at least six out of 12 months.

√Inclusion in the list does not subject to any kind of penalty and sanctions but it deteriorates the global financial image of the country.

?focus area for prelims 2021
√Criteria for including under currency manipulation list
√ devaluation and effects

For mains 2020-21: currency manipulation and its impact

#GALLANT IAS

31/12/2020
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