Central bank vows to back the NT dollar

Officials yesterday denied speculation that the central bank may be planning a dramatic devaluation of the New Taiwan dollar, saying the idea was the personal opinion of one lone researcher.

That news -- out of the Taiwan Research Institute (台綜院) over the weekend -- suggested that the government devalue the currency by as much as 20 percent to NT$40 against the US dollar as a means of boosting exports. Following media reports on the subject, the NT dollar plunged by as much as 1.5 percent to NT$33.45 against the US dollar, its lowest level since October 1998.

Institute officials denied the report all together.

"The Taiwan Research Institute has never suggested that the NT dollar should fall to between NT$38 to NT$40 against the US dollar. The reason that the media aired the report was probably because someone within the institute said some export firms wish that the NT dollar exchange rate would fall to such a level, helping to increase their export competitiveness. However, this was not a suggestion made by the institute," an anonymous spokesman from the institute said.

Liu Tai-ying (劉泰英), head of the research body, also distanced himself from the speculation.

"I believe, as I have always said, that the exchange rate should be determined by market forces," Liu said on Monday. As to the heavy drop on [Monday's] foreign exchange rate and stock market prices, Liu said, "I deeply regret it."

As pressure to take responsibility mounts, executive secretary of the Taiwan Research Institute Liang Rong-huei (梁榮輝) admitted that his comments were behind the speculation, but indicated it was his personal opinion.

"The proposal was strictly my personal opinion," Liang said. "It's my personal observation that if the exchange rate could be depreciated to between NT$38 and NT$40 against the US dollar, it could help to solve the current unemployment problem by boosting export competitiveness."

Liang also expressed regret for the uproar. "I am terribly sorry that my personal opinion has caused so much trouble and turbulence in local financial markets," he said.

Liang also stressed that "since the report was not ordered by Liu, Liu did not see the report [before it was disclosed to the press]."

Much of the stir over the comments comes from media speculation that Liu may be named to head the president's proposed Economic Development Advisory Council (經發會).

Chen, speaking prior to departing Taiwan for the US on Monday, was also opposed to letting the NT dollar fall against the US dollar, presidential secretary-general Yu Shyi-kun said yesterday.

"President Chen has been quite concerned about economic issues," Yu said.

"As to opinions in this area, research units, such as the Taiwan Research Institute and the Chung-Hua Institution for Economic Research, have been providing consultation to President Chen. Chen, however, did not ask Liu to participate in the establishment of the Economic Development Advisory Council."

During the KMT administration over the last decade, Liu has acted an economic advisor to former president Lee Teng-hui (李登輝). Since Lee has been quite friendly with President Chen in recent months, the connection has created speculation that Liu could act as one of Chen's economic advisors.