The U.S. Treasury Department and the Vietnam central bank on Monday said they’ve reached a pact to address American concerns that the Asian country has been manipulating its currency. Treasury Secretary Janet Yellen welcomed the “mutual understanding” and said the agreed to reforms would address Treasury’s concerns and also support the development on Vietnam’s financial markets.
For his part, State Bank of Vietnam Governor Nguyen Thi Hong said his bank “will continue to manage exchange-rate policy within its general monetary policy framework to safeguard the proper functioning of the monetary and foreign exchange markets, to promote macroeconomic stability and to control inflation, not to create an unfair competitive advantage in international trade.” The agreement came after a virtual meeting Monday between the two officials. The state bank said it would allow the Vietnamese dong
to move more in line with fundamentals and will provide data for the U.S. Treasury to conduct analysis into the Vietnamese government’s activities in the foreign exchange markets. At the same time, Vietnam reserves the right to maintain macroeconomic and financial market stability. Marc Chandler, a currency market expert with Bannockburn Global Forex, called the deal a “face-saving gesture.” Last December, the outgoing Trump administration formally accused Vietnam of manipulating its currency in ways to harm U.S. economic interests. The Biden Administration reversed the designation in April after the two sides had begun bilateral talks. Treasury said it would inform other U.S. government agencies about the agreement. The Trump administration had threatened to use Vietnam’s designation as a justification for broad retaliatory tariffs, said Matthew Goodman, senior vice president for economics at the Center for Strategic and International Studies. The U.S. is running a $34.9 billion trade deficit with Vietnam through the first five months of the year, according to Commerce Department data. Despite the rising trade gap, Vietnam remains a very poor country with only 1/25th of U.S. per capita income, Chandler said. The Biden administration doesn’t want to be seen as “kicking the ladder down” on a country that is developing. “When you think about how the world’s going to look in 10 years, Vietnam is going to be “an important strategic place in Asia.” he said. The largest imports from Vietnam into the U.S. are cellphones, furniture and textiles, according to U.S. data. Some of this represents production that has moved from China as a result of tariffs imposed on the Asian giant by the Trump administration. Mark Sobel, who worked at the U.S. Treasury for almost 40 years, including a stint as deputy assistant secretary for international monetary and financial policy, said diplomacy was the right approach to address Vietnam’s currency issues. “These are important commitments to maintain transparency for the Treasury on Vietnamese currency practices,” Sobel said, in an email answer to a request for comment. He is now U.S. chairman at the Official Monetary and Financial Institutions Forum, a think tank focused on central banking. The ICE U.S. Dollar Index
a measure of the currency against a basket of six rivals, was higher Monday in a flight-to-quality trade, analysts said.