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Citibank official sees greenback's decline

As the US trade deficits show no signs of easing, the greenback will continue to slide against other major currencies by 15 percent to 20 percent over the next few years, a Citibank Taiwan economist told a seminar yesterday.

"The New Taiwan dollar normally fluctuates by around 4.5 percent per year. Therefore the local currency will still be under pressure to the appreciate against its US counterpart for the next three years," said Cheng Cheng-mount (鄭貞茂), vice president of Citibank Taiwan.

He made the remark at a seminar on trends in currency changes organized by the Chinese Taipei Pacific Economic Cooperation Committee and the Taiwan Institute of Economic Research (台經院).

Cheng suggested that the central bank moderately curb the NT dollar from rising sharply, but only after a thorough consideration of such elements as inflation, exporters' margins and the nation's investment environment.

The NT dollar has been rising against the greenback recently on speculation that China will loosen its pegged exchange rate because of increased international pressure.

The NT dollar traded NT$0.091 higher yesterday on the Taipei foreign exchange market against the US dollar to close at NT$31.189, its strongest finish since March 18.

A Citigroup report released in February predicted that the NT dollar will rise to N$31 against the greenback by the end of the year.

But the NT dollar has no reason for sharp appreciation against the US dollar, and its recent strength is due to an inflow of money from Wall Street, a Chinese-language daily reported yesterday, citing central bank Governor Perng Fai-nan (彭淮南).

While a stronger yuan will hurt Chinese exporters, including Taiwanese businesspeople with operations in China, it would also increase China's purchasing power for imports, economists say.

Cheng said that China may change its policy this year and allow the yuan to float. But the range will be small, he said.

Bank of Taiwan (台灣銀行) president Lee Sheng-yann (李勝彥) told the seminar that Beijing is likely to loosen the yuan peg soon to rectify its worsening financial situation, given the high non-performing loan (NPL) ratio of 15.57 percent at the four largest state-run banks and inflation, as well as reducing trade friction with major trade partners such as the US and EU.
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