Despite the recent drastic devaluation of the New Taiwan dollar against its US counterpart, the central bank said yesterday that it will not "buck the trend" in the foreign-exchange market.
The local currency, which already under pressure from reports of bird flu infection, had its lowest close in a year yesterday following the remark by central bank Governor Perng Fai-nan (
The NT dollar closed NT$0.03 lower at NT$33.681 on the Taipei foreign exchange market, its weakest close since Oct. 26 last year.
Turnover was US$745 million, substantially down from US$1.072 billion the previous day.
Perng attended a breakfast meeting yesterday with several industrial and business leaders.
According to Theodore Huang (黃茂雄), chairman of the Chinese National Association of Industry and Commerce (工商協進會), Perng told attendees that exchange rates reflect the demand and supply of the market and should be flexible, and therefore the central bank would not buck the trend, but only try to ease the fluctuations.
According to Huang, Perng said that despite losing ground to the US dollar, the NT dollar gained against other major currencies.
For example, the NT dollar has appreciated against the yen by 6.7 percent from a year ago, and rose against the euro by 5.87 percent, showing the local currency is still stable, Huang quoted the bank governor as saying.
Perng joined his counterparts in Japan and South Korea in signaling that monetary authorities would abstain from buying their currencies to stem a slide against the US dollar.
The NT dollar is particularly under pressure following the news that the H5N1 strain of avian flu was discovered in some birds that had been smuggled into Taiwan.
On Wednesday, the central bank issued a statement reiterating its view that the NT dollar is ``relatively stable'' after its recent decline. A falling NT dollar makes it cheaper for Taiwanese exporters to lure buyers with price cuts.
"The central bank probably prefers the Taiwan dollar to weaken to help increase export competitiveness," said Joseph Lee, a trader at Cathay United Bank (國泰 世華銀行). "The central bank probably just doesn't want the decline to be too steep."
Overseas investors' sales of Taiwanese shares also added to the currency's decline, Lee said.
Net stock sales of US$178 million yesterday added to the net US$920 million fund managers abroad sold in the previous six trading sessions, according to Taiwan Stock Exchange figures.
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