US Designates Nine Countries Including South Korea as Currency Monitoring List; Signals Stricter Oversight

South Korea Re-Designated After November Last Year
China Avoids Currency Manipulator Label
Ireland and Switzerland Designated for the First Time

The US Department of the Treasury has once again placed South Korea on its currency monitoring list. In the first currency report released since the launch of the Trump administration, the Treasury also announced its intention to analyze the currency policies of major trading partners more rigorously.

On June 5 (local time), the Treasury designated nine countries?South Korea, China, Japan, Singapore, Taiwan, Vietnam, Germany, Ireland, and Switzerland?as currency monitoring countries in its semiannual report to Congress titled "Macroeconomic and Foreign Exchange Policies of Major Trading Partners."

South Korea had been classified as a monitoring country for about seven years since April 2016, but was removed from the list once in November 2023. However, it was re-designated in November last year and remains on the list in this report. Ireland and Switzerland have been newly added to the monitoring list in this report.

Janet Yellen, US Secretary of the Treasury. Photo by AFP and Yonhap News

The United States evaluates the currency policies of its top 20 trading partners under the Trade Facilitation and Trade Enforcement Act enacted in 2015. The evaluation criteria are: ▲ a trade surplus with the US exceeding $15 billion; ▲ a current account surplus exceeding 3% of GDP; and ▲ foreign exchange market intervention (net purchases exceeding 2% of GDP) in at least 8 out of 12 months. Countries meeting two of these criteria are classified as monitoring countries, while those meeting all three are subject to enhanced analysis.

South Korea was designated as a monitoring country for meeting the trade surplus and current account surplus criteria. According to the Treasury, South Korea's current account surplus rose sharply to 5.3% of GDP, up from 1.8% the previous year, due to an increase in the goods trade surplus. The trade surplus with the US also increased significantly, from $14 billion in 2023 to $55 billion in 2024.

The details of foreign exchange market intervention were also disclosed. The Treasury stated that the South Korean government intervened in the foreign exchange market in April and December 2024 in response to downward pressure on the won, and sold a net total of $11.2 billion over the year (0.6% of South Korea's GDP). The Treasury emphasized that the South Korean government should continue to limit its intervention in the foreign exchange market going forward.

This report is notable as it is the first currency report since the launch of the Trump administration. The Trump administration has been considering including currency issues as part of trade negotiations.

China was not designated as a currency manipulator in this report either. However, the Treasury pointed out that China's currency policy is less transparent than those of other trading partners, especially as the yuan faces depreciation pressure. The Treasury warned that if evidence emerges of attempts to prevent yuan appreciation, China could be designated as a currency manipulator in the future.

The Treasury announced that it will strengthen its analysis of trading partners' currency policies going forward. In particular, it plans to focus on cases where central banks justify market intervention as a means to ease disorderly market conditions when their currencies are under appreciation pressure.

The Treasury also added that if unfair currency practices are identified, it may recommend strong measures such as the imposition of tariffs.

Treasury Secretary Scott Besant stated, "We will continue to strengthen our analysis of currency practices and increase the costs associated with being designated a currency manipulator," adding, "Going forward, the Treasury will use all available tools to implement strong countermeasures against unfair currency practices."

As the evaluation criteria are expected to become more stringent in qualitative terms, the foreign exchange authorities are likely to monitor the situation closely.

The next US currency report is expected to be released around October or November. In a press release issued on the same day, the Ministry of Economy and Finance stated, "The South Korean government will continue to expand mutual understanding and trust regarding currency policy through ongoing communication with the US Treasury," and added, "We also plan to conduct the ongoing Korea-US consultations on currency matters with close attention to detail."