The nation's central bank said that the exchange rate of the New Taiwan dollar depends on the market supply and demand, in the wake of China announcing last night that it will allow its currency to fluctuate against a basket of currencies and end its decade-old fixed-exchange rate against the US dollar.
"The central bank will not step in unless abnormal market expectations distort the free-market mechanism," the Central News Agency cited George Chou (周阿定), the director general of the central bank's currency department, as saying yesterday.
Chou's comments came after the People's Bank of China announced last night on its Web site that it will allow the Chinese yuan to appreciate by 2 percent, which would revalue the currency against the US dollar to 8.11, up from 8.28.
The NT dollar yesterday rose NT$0.048 to close at NT$31.953 at the Taipei foreign-exchange market at 4pm, well before China's yuan-revaluation announcement.
While the central bank appeared to downplay the possible impact of the revaluation, Cheng Cheng-mount (鄭貞茂), chief economist of Citigroup in Taipei, said he expected the central bank to adopt a wait-and-see attitude on fluctuations in the NT dollar's value today.
But Cheng said the revaluation of the yuan's value is minimal and, accordingly, is not expected to have an impact on Taiwan's economy.
"The two-percent appreciation is the result of a compromise under US pressure, as China thinks such a narrow range of revaluation is bearable in light of its stunning economic growth of 9.5 percent in the first half [of this year]," Cheng said.
"Basically, I think the sudden move has been made to test the market's acceptance of the yuan's appreciation and reduce trade friction with the US," Cheng said.
With economic growth still on the track and a trade surplus amounting to US$70 billion, China can afford to lose a bit in exports in order to gauge market reaction before further appreciations, Cheng said. The recent strength of the US dollar is also a factor that influenced Beijing's decision at this time, he said.
Echoing Cheng, Kung Ming-hsin (
TIER forecasted a 10 percent revaluation for the Chinese yuan against the US dollar.
For the time being, the NT dollar may only strengthen by less than 2 percent against its US counterpart to offset the recent declining momentum, unless the Japanese yen soared to considerable heights, the economist said.
But the nation's currency would be subject to much heavier appreciation pressure should China further relax its currency policy, Kung said.
Tseng Chu-wei (曾巨威), professor of public finance at National Chengchi University, however, said that the New Taiwan dollar has been flexible against other currencies.
"The yuan is just returning to its normal market price under pressure, especially from the US. Unless the yuan shows more movement in the near future, the NT dollar will not be affected," he said.
The slight revaluation of the yuan may have little impact on Taiwan's economy, but local stock and foreign exchange markets may experience turbulence after the abrupt move, Citibank's Cheng said.
In addition, China-bound Taiwanese manufacturers that mainly make money from exporting their products are expected to be somewhat affected by the changed currency policy, he said.
Tseng of National Chengchi University, agreed and said Taiwanese businesspeople in China might see their competitive edge blunted if their business strategies remain unchanged.
"Taiwanese companies are increasingly relying on China by engaging in indirect exports -- manufacturing or processing goods in China before shipping them to other nations. Therefore, the prices of their goods will edge up, affecting their competitive edge."
It is worth keeping an eye on how China will adjust its macroeconomic policy and measures to rein in its overheating economy, he said.
"But overall it will not have too big an impact on our economy and currency value," Tseng said.
ISSUES: Gogoro has been struggling with ballooning losses and was recently embroiled in alleged subsidy fraud, using Chinese-made components instead of locally made parts Gogoro Inc (睿能創意), the nation’s biggest electric scooter maker, yesterday said that its chairman and CEO Horace Luke (陸學森) has resigned amid chronic losses and probes into the company’s alleged involvement in subsidy fraud. The board of directors nominated Reuntex Group (潤泰集團) general counsel Tamon Tseng (曾夢達) as the company’s new chairman, Gogoro said in a statement. Ruentex is Gogoro’s biggest stakeholder. Gogoro Taiwan general manager Henry Chiang (姜家煒) is to serve as acting CEO during the interim period, the statement said. Luke’s departure came as a bombshell yesterday. As a company founder, he has played a key role in pushing for the
China has claimed a breakthrough in developing homegrown chipmaking equipment, an important step in overcoming US sanctions designed to thwart Beijing’s semiconductor goals. State-linked organizations are advised to use a new laser-based immersion lithography machine with a resolution of 65 nanometers or better, the Chinese Ministry of Industry and Information Technology (MIIT) said in an announcement this month. Although the note does not specify the supplier, the spec marks a significant step up from the previous most advanced indigenous equipment — developed by Shanghai Micro Electronics Equipment Group Co (SMEE, 上海微電子) — which stood at about 90 nanometers. MIIT’s claimed advances last
EUROPE ON HOLD: Among a flurry of announcements, Intel said it would postpone new factories in Germany and Poland, but remains committed to its US expansion Intel Corp chief executive officer Pat Gelsinger has landed Amazon.com Inc’s Amazon Web Services (AWS) as a customer for the company’s manufacturing business, potentially bringing work to new plants under construction in the US and boosting his efforts to turn around the embattled chipmaker. Intel and AWS are to coinvest in a custom semiconductor for artificial intelligence computing — what is known as a fabric chip — in a “multiyear, multibillion-dollar framework,” Intel said in a statement on Monday. The work would rely on Intel’s 18A process, an advanced chipmaking technology. Intel shares rose more than 8 percent in late trading after the
GLOBAL ECONOMY: Policymakers have a choice of a small 25 basis-point cut or a bold cut of 50 basis points, which would help the labor market, but might reignite inflation The US Federal Reserve is gearing up to announce its first interest rate cut in more than four years on Wednesday, with policymakers expected to debate how big a move to make less than two months before the US presidential election. Senior officials at the US central bank including Fed Chairman Jerome Powell have in recent weeks indicated that a rate cut is coming this month, as inflation eases toward the bank’s long-term target of two percent, and the labor market continues to cool. The Fed, which has a dual mandate from the US Congress to act independently to ensure