The China Post news staff
The China Post news staff — Taiwan’s export trade would be seriously undermined if the Central Bank of China (CBC) adopts a hands-off attitude toward the appreciation of the New Taiwan dollar against the U.S. greenback, a top CBC official said yesterday.
Chou A-ting, deputy governor of the CBC, made the remarks at a Finance Committee meeting of the Legislative Yuan, in response to questions from lawmakers concerning recent sharp fluctuations of the local currency.
At the meeting, Lawmaker Alex Fai of the ruling Kuomintang asked Chou whether the NT dollar will rise further and whether the CBC will do something about it. “If a market mechanism is allowed to work fully in the forex market, then the NT dollar is likely to rise further to the NT$28:US$1 level,” Fai said.
Chou said that to stave off the influx of international speculative hot money, proper intervention in the foreign exchange (forex) market is needed, adding that Taiwan’s exports and economic growth will be seriously affected if the CBC fails to rein in runaway appreciation of the local currency.
He continued that since local exporters and manufacturers based their export quotations on the exchange rate of NT$30:US$1, their exports would be sharply impacted if the local currency rises to NT$28:US$1, “Taiwan’s economic growth relies heavily on export trade, and without export growth, the island’s economic expansion would be a difficult job,” Chou said.
On the same occasion, Vice Finance Minister Chang Sheng-ho said that it’s impossible for the U.S. greenback to remain unstable over the long term, as many economists and Nobel Prize winners in the U.S. won’t allow such a phenomenon to happen in their country. Chang said that he’s fully confident that CBC Governor Perng Fai-nan can maintain the exchange rate of the local currency against the greenback at an optimal level. Also yesterday, the NT dollar yesterday edged up NT$0.06 to close at NT$30.733 against the U.S. dollar, with turnover reaching US$665 million.
The local currency opened at the day’s low of NT$30.793:US$1 and moved to a high of NT$30.348 before rebounding.
The weakness of the U.S. dollar against other Asian currencies in the region paved the path for depreciation of the U.S. currency against the New Taiwan dollar, dealers said.
Foreign banks and exporters continued to buy the New Taiwan dollar, while greenback buying by importers offset the losses to some extent, they said.
As worries over the debt problems in Europe remain, the euro is expected to fall further against the U.S. dollar, the dealers said, adding that a weaker euro is expected to help the greenback regain momentum in Asian markets, the dealers said.
Taiwan’s central bank intervened in the foreign exchange market again, shoring up the U.S. dollar in late trade to prevent a rapid appreciation of the New Taiwan dollar, the dealers said.
It is likely that the central bank will be able to maintain the value of the U.S. dollar above NT$30.70 in the near term, they predicted.