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US removes India from its currency monitoring list

Washington: The US on Tuesday removed India from its currency monitoring list of major trading partners, citing steps being taken by New Delhi which addressed some of the Trump administration’s major concerns.

For the first time, the US placed India in its currency monitoring list of countries in May 2018 with potentially questionable foreign exchange policies.

Switzerland is the other nation that has been removed by the US on Tuesday from its currency monitoring list which among others include China, Japan, South Korea, Germany, Italy, Ireland, Singapore, Malaysia and Vietnam.

“India has been removed from the monitoring list in this report, having met only one out of three criteria – a significant bilateral surplus with the    United States – for two consecutive reports,” the Treasury Department said in its latest semi-annual report on macroeconomic and foreign exchange policies of major trading partners of the US sent to the Congress.

After purchasing foreign exchange on net in 2017, the central bank steadily sold reserves for most of 2018, with net sales of foreign exchange reaching 1.7 per cent of GDP over the year, it said.

India maintains ample reserves according to the IMF metrics for reserve adequacy, the Treasury Department said in its report.

In both Switzerland and India, there was a notable decline in 2018 in the scale and frequency of foreign exchange purchases, the report said.

“Neither Switzerland nor India met the criteria for having engaged in persistent, one-sided intervention in either the October 2018 report or this report. Both Switzerland and India have been removed from the monitoring list,” the Treasury said in its report running into over 40 pages.

A country can intentionally undervalue its currency by selling its own currency to drive down its value, making its exports cheaper and more competitive.

India for the first time was placed by the US in its currency monitoring list of countries with potentially questionable foreign exchange policies in May 2018 along with five other countries – China, Germany, Japan, South Korea and Switzerland.

In its next report in October 2018, the Treasury had said that India has made improvements and its name would be removed from the currency manipulation list in the next report.

“India’s circumstances have shifted markedly, as the central bank’s net sales of foreign exchange over the first six months of 2018 led net purchases over the four quarters through June 2018 to fall to US$ 4 billion, or 0.2 per cent of the GDP,” the Treasury had said in its October 2018 report.

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