In a semiannual report submitted to Congress on Tuesday, the US Treasury also named eight other trading partners as those requiring attention regarding their currency practices. The list comprised China, Japan, Germany, Italy, Ireland, Singapore, Malaysia and Vietnam.
Also, Korea could be removed from the monitoring list in the next six months, should it maintain the current conditions, according to the report.
“Given that Korea now only meets one of the three criteria from the 2015 Act, Treasury could remove Korea from the monitoring list if this remains the case at the time of its next report,” it said.
“Korea must demonstrate that improvements against the criteria are durable before it will be removed from the monitoring list.”
Under revised standards, a US trading partner is named a currency manipulator if it has a bilateral trade surplus of $20 billion or more with the US, a current account surplus of 2 percent or more of its gross domestic product, and persistent one-sided intervention in foreign exchange markets.
Asia’s fourth-largest economy currently only meets the current account surplus criteria – 4.7 percent of its GDP as of 2018.
The country’s trade surplus with the US has been declining, standing at $18 billion last year, dipping below the $20 billion mark for the first time since 2013, according to the report.
The key point of controversy regarding the currency manipulator designation was whether Seoul’s financial authorities intervened excessively in the foreign exchange market to support the local currency.
Pointing out that the Korean won depreciated 4.1 percent against the US dollar in 2018, Washington claimed that Seoul had made net sales of foreign exchange in 2018.
Disputing the point, Seoul in March publicly reported the details on its foreign exchange market interventions for the first time, a move welcomed by the US Treasury in terms of policy transparency. Financial authorities sold $187 million in the second half of 2018 in a market stabilizing action, the Bank of Korea said.
In late September, the Finance Ministry is to deliver a second report with updates on the first half of the year.
“The authorities should continue to limit currency intervention to only exceptional circumstances of disorderly market conditions, and Treasury will continue to closely monitor Korea’s currency practices,” the report said.
By Bae Hyun-jung (firstname.lastname@example.org)