US Treasury says Vietnam deliberately undervalued currency in 2019

The US Treasury has determined that Vietnam's currency was deliberately undervalued in 2019 by about 4.7% against the dollar, according to a new currency valuation assessment sent to the US Commerce Department.

In the assessment associated with a Commerce anti-subsidy investigation into vehicle tire imports from Vietnam, the Treasury said the undervaluation was the result of Vietnamese "government action on the exchange rate."

The assessment is the first issued by the Treasury under a new U.S. rule that allows the Commerce Department to consider currency undervaluation as a form of subsidy when determining anti-subsidy duties, potentially increasing them.

The determination also could increase the chances that the Treasury designates Vietnam a "currency manipulator" when it issues its longdelayed semi-annual currency report. Such a designation would require Treasury Secretary Steven Mnuchin to seek bilateral consultations with

Hanoi to try to correct the situation.

In its assessment letter to Commerce, the Treasury said Vietnam made $22 billion state foreign exchange purchases in 2019, including through the State Bank of Vietnam, which pushed down Vietnam's real effective exchange rate by 3.5% to 4.8%, the Treasury said.

It said the country's action caused the dong exchange rate, which was a nominal 23,224 per dollar in 2019, to be about 1,090 dong lower than levels consistent with equilibrium real exchange rates.