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U.S. refrains from labelling China, others as currency manipulators

Reuters  |  WASHINGTON 

By David Lawder

WASHINGTON (Reuters) - The again refrained from naming any major trading partners as currency manipulators on Friday, but the U.S. Treasury's semi-annual currency report criticized for the "non-market direction" of its economy and warned of global risks.

The report comes as the pursues potential tariffs, negotiations and other restrictions to try and cut a massive trade deficit with

In the report, the said it has added to a monitoring list for extra scrutiny, while keeping China, Japan, Germany, and on the list started in 2016 by the

The report did not mention Donald Trump's recent threats to impose billions of dollars worth of tariffs on Chinese goods over Beijing's intellectual property practices, or pending Treasury investment restrictions on Chinese investment in the

It said China's yuan in 2017 on a trade-weighted basis was broadly unchanged against the dollar.

"The increasingly non-market direction of China's economic development poses growing risks to its major trading partners and the long-term global growth outlook," the Treasury said.

Treasury called for "further opening of the Chinese economy to U.S. goods and services, as well as reducing the role of state intervention and allowing a greater role for market forces."

Axel Merk, and portfolio manager of in Palo Alto, California, said it was not surprising that Treasury did not name a currency manipulator, saying that doing so is not the administration's interest.

"What labelling someone a currency manipulator means is handing over control to to study the topic," Merk said. "By not labelling them a currency manipulator, they can continue pushing through the branch."

Treasury said had increased its foreign exchange purchases over the first three quarters of 2017, with full-year purchases reaching a record $56 billion in 2017, or 2.2 percent of the country's

"Given that Indian foreign exchange reserves are ample by common metrics, and that maintains some controls on both inbound and outbound flows of private capital, further reserve accumulation does not appear necessary," the Treasury said in its report.

ran a goods trade surplus of $23 billion in 2017 with the United States, far less than China's $375 billion goods trade surplus.

Treasury said should advance macroeconomic reforms that support greater household consumption growth and help rebalance the economy away from investment.

Treasury also said it "places significant importance" on adhering to its commitments to refrain from engaging in competitive devaluation of its yuan.

Some experts have speculated that could use yuan devaluation as a weapon in a broader trade war with the


The currency report also did not provide an update on a currency agreement under negotiation with that was announced as part of an update to the U.S.-South Korean Free Trade Agreement.

The agreement was aimed at increasing the transparency of Seoul's foreign exchange interventions, and the Treasury said should "promptly begin reporting" such data.

Treasury estimated that had bought $10 billion worth of foreign exchange reserves from November 2017 to January 2018 but added that "should limit currency intervention to only truly exceptional circumstances of disorderly market conditions."

The Treasury report recommended that South Korea, Japan, and all take steps to bolster domestic demand, which would help to reduce current account surpluses and trade surpluses with the

The Treasury said "has a responsibility" as the world's fourth largest economy to contribute to more balanced trade flows.

"Allowing an increase in domestic demand against relatively inelastic supply should help push up wages, domestic consumption, relative prices against many other euro area members and demand for imports," the Treasury said.

(Reporting by David Lawder; Editing by and Leslie Adler)

(This story has not been edited by Business Standard staff and is auto-generated from a syndicated feed.)

First Published: Sat, April 14 2018. 03:42 IST