Amid concerns that a weakening yen may lead to further depreciation of the New Taiwan dollar, one pundit says the central bank may do little to stop the slide.
"There's a consensus in the market that the central bank is allowing the local currency to depreciate," said a dealer who requested anonymity, "as long as Japanese currency does not fall through the ?130 level for one US dollar."
The central bank, which has been tight-lipped over the currency issue during the last week, entered the market early in the session to prevent volatility, the dealer said.
But the move failed to stop the NT dollar's fall. The NT dollar closed yesterday at NT$34.727 against the US dollar on the Taipei foreign exchange market, down NT$0.02 from a day earlier. The local currency, which opened yesterday at NT$34.720, was traded between NT$34.720 and NT$34.785 throughout the session, with a turnover of US$934 million.
While the NT dollar has recently followed the movement of a weaker yen, it is expected to be traded at NT$34.59 against the greenback this quarter and NT$34.72 in the next, predicted Wu Chung-shu (吳中書), a research fellow at the Institute of Economics of Academia Sinica (中研院).
"The to-be-increased [Taiwan-US trade] surplus will help pick up the New Taiwan dollar to an average of 34.33 next year," Wu added.
Wu made the forecast yesterday during a press conference and said Taiwan would benefit from a minor yen depreciation.
"[A weaker yen] is actually positive for Japan's economy and will help improve the region's economy. It will help boost Taiwan's exports, with costs of raw materials from Japan becoming cheaper," he said.
Shrugging off worries that a decline in the yen will hurt Taiwan's exporters' profitability as export orders will turn to Japan instead, Wu said that exporters of the two nations do not compete with each other in several export categories.
However, vice chairman of the Council for Economic Planning and Development, Lee Kao-chao (
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