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Central bank not intervening to help NT dollar: Perng

Central bank Governor Perng Fai-nan (彭淮南) yesterday flatly rejected media speculation that the bank had stepped in to fuel the local currency's under-valuation to protect the nation's exporters.

"We didn't buy any US dollars to manipulate the New Taiwan dollar's exchange rate, which is always decided by market supply and demand," Perng said.

He said the nation's foreign exchange reserves had only increased by US$4 billion so far this year, which is smaller than the annual investment return. This was proof the bank had not been buying greenbacks, he said.

"There's no excessive supply of US dollars, which suggests we are now seeing a balanced supply and demand of US dollars," Perng said.

He refused to comment on whether the current exchange rate against the greenback -- between NT$32.2 and NT$32.3 -- was an ideal level. When asked if the central bank had sold any US dollars to prop up the NT dollar, Perng said: "I can't tell you."

Market observers view such comments as a signal that the bank has dumped some of its US dollar holdings to prop up the NT dollar's exchange rate, although selling US dollars can also be a wealth management strategy to limit losses in the face of a weakening US currency.

Dealers speculated yesterday that the central bank's preferred range for the NT dollar's exchange rate has recently narrowed, since it has bought and sold US dollars whenever the local currency rose or fell too much.

Perng also denied media reports claiming the rise in consumer prices has been too much for the central bank to stem.

"The central bank's priority has always been stabilizing the nation's consumer prices, while carefully weighing the impact of a tightened monetary policy on the local economy," he said.

On Thursday, Perng told the legislature's Finance Committee that the bank's monetary policy would have a limited effect on inflationary pressures if higher prices were a result of supply factors. He said if the bank continued to adjust its monetary policy through interest rate hikes, economic growth could be hurt.

Also seeStandard Chartered backs NT, Asia currency buy-up
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