India, Thailand guilty of currency manipulation?

singapore — India and Thailand may have to give freer rein to the rupee and baht this year to avoid triggering US accusations that they’re manipulating their currencies to support exports.

The Reserve Bank of India has already exceeded a key threshold on how much it can intervene to curb the rupee’s gains that the US monitors, according to Nomura Holdings. Policy makers in Thailand have also passed this level with the baht, said Bank of Tokyo-Mitsubishi UFJ Ltd.

Should the two countries’ central banks seek to assuage US concerns — and avoid a range of possible penalties — it would likely lead to gains for their currencies, potentially reducing their export competitiveness. For all the efforts of policy makers last year, the baht appreciated almost 10 per cent against the dollar, while the rupee climbed 6.4 per cent.

The two nations posted the biggest percentage gains among Asian emerging markets in their foreign-exchange reserves last year, more evidence their central banks are buying dollars to curb currency gains. China, South Korea and Taiwan — which have been previously called out by the US — recorded some of the smallest increases.

The threat of US complaints will support more appreciation in Asian currencies in general this year, said Rajeev De Mello, head of Asian fixed income at Schroder Investment Management in Singapore. There’s been a notable reduction in intervention from the three North Asian central banks, according to Schroder Investment and Australia & New Zealand Banking Group Ltd.

“Thailand and India have been two exceptions, which have been actively accumulating reserves to stem appreciation pressure on their currencies,” said Khoon Goh, head of research at ANZ in Singapore. Thailand isn’t one of the top 12 trade partners that the US normally focuses on but could find itself under scrutiny if the net is cast wider, Goh said.

The rupee and baht have made strong starts to the year, gaining 0.6 per cent and one per cent against the dollar, respectively.

The US hasn’t branded any country a manipulator since 1994. China and Korea were the only two emerging markets on the list at the last semi-annual report in October, while Taiwan was removed. — Bloomberg