The US has asked India to allow the exchange rate to move to reflect economic fundamentals and limit foreign exchange intervention.

US Treasury Department added India to the monitoring list countries which are branded as currency manipulators while Switzerland and Vietnam were named as currency manipulators.

"Over the four quarters through June 2020, four major US trading partners -- Vietnam, Switzerland, India, and Singapore -- intervened in the foreign exchange market in a sustained, asymmetric manner," the US Treasury Department said.

Treasury found that ten economies warrant placement on Treasury's "Monitoring List" of major trading partners that merit close attention to their currency practices: China, Japan, Korea, Germany, Italy, Singapore, Malaysia, Taiwan, Thailand, and India, the last three being added in this Report.

The US Treasury in its report on trading partners said India met two of the three criteria in this Report, having a material current account surplus and engaging in persistent, one-sided intervention over the reporting period. Treasury will closely monitor and assess the economic trends and foreign exchange policies of each of these economies.

The US treasury said on India, "The authorities should allow the exchange rate to move to reflect economic fundamentals and limit foreign exchange intervention to circumstances of disorderly market conditions. India can also leverage the recovery period to pursue structural reforms that will open its market further to foreign investment and trade, including foreign portfolio investment in Indian sovereign and sub-sovereign bonds, thereby fostering stronger long-term growth."

The report noted that the rupee has diverged somewhat from peer currencies, however, amid RBI intervention. While many emerging market currencies started to rebound from their March lows in May and June, the rupee remained relatively rangebound as the RBI resumed large foreign exchange purchases. The rupee has appreciated somewhat since late August, but it has still not recovered as much lost ground as its emerging market peers have, US Treasury said.

In its August 2020 External Sector Report covering 2019, the IMF assessed the real effective exchange rate to be in line with economic fundamentals.

India's goods trade surplus with the United States was $22 billion for the four quarters through June 2020, broadly in line with its average level over the preceding five years. India also ran a $5 billion services trade surplus with the United States in 2019. India's exports to the United States are concentrated in sectors that reflect India's global specialization (notably diamonds, pharmaceuticals, and IT services), while U.S. exports to India reflect India's domestic needs (fuels, aircraft, higher education, and software).

"India has been exemplary in publishing its foreign exchange market intervention, publishing monthly spot purchases and sales and net forward activity with a two-month lag. The RBI states that the value of the rupee is broadly market-determined, with intervention used only to curb undue volatility in the exchange rate", the US treasury said.

(IANS)