Print

Mail

wiki links

Rising NT a double-edged sword

Taiwan may get a boost from the appreciation of the New Taiwan dollar against the US dollar as the nation's industrial structure shifts from manufacturing to the service sector, an economist with a private research house said yesterday.

"We shouldn't just focus on a strong NT dollar's short-term impact on Taiwan's manufacturing sector. We should look further ahead," said Hwa Erh-cheng (華而誠), a senior economist with the Polaris Research Institute (寶華綜合研究院).

Hwa made the remarks at a forum arranged by the Council for Industrial and Commercial Development (工商建研會) on the movements of major world currencies and their influence on Taiwan's export-oriented economy.

On the local foreign exchange market, the NT dollar yesterday traded NT$0.008 lower against its US counterpart to close at NT$31.568.

The local currency has risen about 10 percent against the greenback since the fourth quarter of last year, before the US dollar regained ground in recent weeks, according to statistics compiled by the central bank.

The 10 percent rise is less than the surges posted by the Japanese yen and the South Korean won, but still sharp compared with the Chinese yuan, which is pegged to the US dollar.

"I'm not too worried about the revaluation of the NT dollar. A strong NT dollar will help reduce costs for Taiwan's service sector," he said.

Taiwan relies on exports for economic growth, but the government is trying to shift the engine for growth toward the service sector as stiff competition squeezes margins for manufacturers.

To further stimulate domestic demand, Hwa suggested that the central bank continue to adopt a looser monetary policy.

While the NT dollar will continue to rise against the US dollar, fueled by an influx of hot money from abroad on a weakening greenback, the US dollar will see a mild appreciation against major currencies during the first half of this year, said Jiang Fan (蔣凡), the general manager of Goldman Sachs' Asia division.

The US dollar declined too rapidly in the final quarter of last year, Jiang said, adding that most global funds are beginning to favor the greenback again.

But a researcher at the Chung-Hua Institution for Economic Research (中經院) said a consistently appreciating NT dollar will deal a blow to exports and drag down economic growth.

If the local unit appreciates to the mark of 30.07 to the US dollar, the exports sector will be noticeably affected, slashing the country's economic growth rate from 4.37 percent -- as first predicted by the institution -- to 3.82 percent for this year, senior researcher Wang Su-wan (王素彎) said in a report released by the think tank.
This story has been viewed 2075 times.