UPDATE 1-Taiwan says U.S. understood its 'special' situation in currency report

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TAIPEI, April 16 (Reuters) - The U.S. decision not to brand Taiwan a currency manipulator was a reflection of the effective communication between the two sides and Washington understanding the island’s “special” economic situation, a Taiwanese central bank official said on Friday.

The U.S. Treasury Department said on Friday said Taiwan, along with Switzerland and Vietnam, tripped its thresholds for possible currency manipulation under a 2015 trade law. But it refrained from formally labelling them as manipulators, citing insufficient evidence under a separate law.

Taiwan’s tech-focused exports have soared during the COVID-19 pandemic due to global demand for laptops, tablets and other equipment to support the work-from-home boom.

The central official, speaking on condition of anonymity, told Reuters that a rise in U.S. demand for Taiwan’s goods over the past year had led to the island’s yawning trade surplus with the United States, while U.S. quantitative easing had caused large inflows of capital, the official added.

“This is a special situation, and the U.S. side was able to accept our suggestions,” he said. “For the sake of financial and currency stability the central bank cannot but enter the market.”

The official said the fact that the U.S. Treasury did not call them a currency manipulator showed that Taiwan continued to communicate effectively with the United States.

The Taiwan dollar’s 5.6% gain against the greenback last year was among the strongest in Asia and it is still a strong outperformer this year, remaining near a 23-year high.

The central bank said it intervened to the extent of $39.1 billion last year as it stepped up efforts in November and December to “avoid serious disorder”.

Taiwan’s case is complicated further by geopolitical pressures, including heightened military tensions with China, and the island’s position as a major exporter of semiconductors that are needed to help ease a supply shortage for U.S. manufacturers.

Taiwan was last formally labelled a currency manipulator by the United States in December 1992. It was put back on the monitoring list in 2020. (Reporting by Liang-sa Loh; Writing by Ben Blanchard; Editing by Catherine Evans and Pravin Char)