India to drop off US Treasury monitoring list - TDS

Mitul Kotecha, senior emerging markets strategist at TD Securities, suggests that in the search for currency manipulators the semi-annual UST report on FX policies due shortly, is important.

Key Quotes

“We find that no country is likely to be labelled a currency manipulator. Japan and Taiwan may have come closest.”

“China only breaches one criteria. Its bilateral trade surplus with the US continues to grow, yet its current account surplus has shrunk and FX intervention has been limited. A stronger CNY suggests that Treasury concerns about the currency may soften.”

“India and Korea also breach just one criteria, according to our estimates. So does Thailand but this country is not officially on the list.”

“India is likely to be removed from the list next time as it is the second consecutive report that the country has failed to breach two criteria.”

“We doubt that removal from the list will mean that India steps up FX intervention given the risk of being added back to the monitoring list. As such we think INR will remain supported in the months ahead, with RBI continuing to limit USD buying interventions.”