The United States and 11 like-minded countries have signed a pact which aims to deter currency manipulation, a practice which has widened the U.S trade gap with countries like China.
These countries have promised to avoid "unfair currency practices and would refrain from competitive devaluation", NPR reported.
In simple terms, currency manipulation or currency intervention occurs when a country buys or sells their foreign currency thus making their exports cheaper and hurts competitors in other countries.
The countries involved in the pact are the same member countries of the Trans-Pacific Partnership (TPP). White House officials said the pact would eliminate tariffs and integrate regulations throughout the Pacific Rim, as reported by NPR.
This also means that the member countries would have to make transparent their foreign exchange reserves and capital flows. They would also have to regularly hold consultations regarding their policies.
Some of the members of the TPP other than U.S are - Australia, Brunei Darussalam, Chile, Canada, Japan, Malaysia, Mexico, New Zealand, Peru and Vietnam.
However, the pact is not part of the TPP, the details of which were released a day ago, because other countries did not want this aspect of included. The pact cannot be subject to the TPP's enforcement provisions.
This would be a new way for U.S officials to combat currency manipulation, Jeffrey Schott, a senior fellow at Peterson Institute for International Economics told NPR.
"This declaration is not subject to any of the dispute resolution procedure of Trans-Pacific Partnership. It provides more information to help deal more effectively with concerns about currency manipulation," he added. "This would give more tools and data for the Treasury department to push its financial diplomacy with partner countries."
Countries that want to manipulate their currencies will be held accountable, Treasury Secretary Jacob Lew told the Wall Street Journal.
Earlier, China had been accused of manipulating their currency, Yuan. Amongst the TPP member countries, Vietnam too is accused of the practice sometimes, NPR reported.
The report stated that US Congress saw currency manipulation as a big problem for U.S exporters and had pressurized President Obama to address it at TPP talks. Currency manipulation has become an issue in the presidential campaign with Republicans and Democrats promising to take strict measures to address the problem.