On November 15, 2024, the U.S. Treasury Department announced that Malaysia has been removed from its currency manipulation watch list in its final semi-annual report under President Biden, which covers the year ending June 30 [6485ba0d]. This decision signifies a notable shift in the U.S. government's assessment of Malaysia's economic practices, reflecting a recognition of the country's balanced and transparent economic and foreign exchange policies. Mohd Sedek Jantan, head of investment research at UOB Kay Hian Wealth Advisors, emphasized that this development showcases Malaysia's commitment to sound policy management [cd5a31b6].
However, it is important to note that Malaysia was removed from the watch list after meeting only one of the three criteria set by the U.S. Treasury: a significant bilateral surplus [f4b423ab]. UOB Global Economics & Markets Research indicated that Malaysia could remain off the list as long as it continues to meet no more than one of the criteria, which also include a material current account surplus and persistent foreign exchange intervention [f4b423ab].
The report indicated that no major U.S. trading partner was found to have manipulated its currency during this period, which underscores a more favorable view of currency practices among allies [6485ba0d]. In contrast, South Korea was added to the watch list due to its large global current account surplus and significant trade deficit with the U.S. [6485ba0d]. Ongoing concerns regarding China's foreign exchange practices have led to its continued presence on the monitoring list, alongside Japan, South Korea, Taiwan, Singapore, Vietnam, and Germany [6485ba0d]. Notably, Japan's US$65 billion trade surplus with the U.S. and its interventions to support the yen's value were specifically mentioned in the report [6485ba0d].
The removal of Malaysia from the watch list is expected to enhance the country's credibility and boost investor confidence, as it reflects a commitment to maintaining economic stability and transparency [cd5a31b6]. Mohd Sedek Jantan also warned that sustaining this status will require ongoing efforts in policy management and proactive diplomacy to secure trade agreements and mitigate excessive U.S. influence [cd5a31b6]. He cautioned that even minor economic shifts could lead to Malaysia's re-inclusion on the list, highlighting the delicate balance the country must maintain [cd5a31b6]. This latest report illustrates a shift in the Biden administration's approach to currency manipulation, contrasting with the previous administration's more aggressive stance, particularly regarding Vietnam and Switzerland [6485ba0d]. UOB also noted that the report did not disturb financial markets but warned of potential scrutiny if the Trump administration were to return to power [f4b423ab].