Vietnam: US resolves currency dispute with Vietnam

  • The US has reached a deal with Vietnam to resolve a dispute over the south-east Asian nation’s currency that had soured economic relations between the two countries during Donald Trump’s presidency.
  • Janet Yellen, the US Treasury secretary, announced the agreement at the end of a meeting with Nguyen Thi Hong, governor of the State Bank of Vietnam, on 19 Jul 21, in a move that could stave off the threat of punitive tariffs on the Asian nation due to its currency practices.
  • “I believe the State Bank of Vietnam’s attention to these issues over time not only will address Treasury’s concerns, but also will support the further development of Vietnam’s financial markets and enhance its macroeconomic and financial resilience,” Yellen said in a statement.
  • The Biden administration had already withdrawn the currency manipulator designation imposed on Vietnam by Trump in Dec 20, but the deal reached on 19 Jul 21 will codify the detente.
  • Under the deal, Vietnam’s central bank will underscore that its monetary policy is intended to “promote macroeconomic stability and to control inflation”.
  • Vietnam also said it would abide by IMF rules “to avoid manipulating its exchange rate in order to prevent effective balance of payments adjustment or to gain an unfair competitive advantage and will refrain from any competitive devaluation of the Vietnamese dong”.
  • It also pledged more transparency and flexibility in managing its currency.
  • America’s trade deficit in goods with Vietnam is the third largest of any country year to date, after China and Mexico. Vietnam has repeatedly denied manipulating its currency.

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