Defending the body’s monetary policy, central bank Deputy Governor George Chou (周阿定) said yesterday the exchange rate only had a limited impact on foreign trade and blamed the sharp decline in exports partly on over-concentration of high-tech products and lack of branding.
Chou made the comments after the New Taiwan dollar dropped 0.5 percent to NT$34.797 against the US currency. It is expected that the NT dollar will soon fall below NT$35, a situation that would benefit exporters but hurt importers.
“The currency rate only has a short-term influence on foreign trade,” Chou told reporters in an unscheduled briefing. “In the long run, its performance has more to do with economic fundamentals. It is not practical to count on exchange rates to boost exports.”
The local currency had devalued NT$0.169 against the greenback at end of the trading session, reversing a 0.5 percent gain a day earlier. The NT dollar has dropped 5.6 percent against the US dollar this year.
Chou said the NT dollar was relatively stable, adding that the Japanese yen, South Korean won and euro had dropped 2.09 percent, 1.8 percent and 1.58 percent respectively yesterday.
Citing a report, the deputy governor attributed rising demand for the US dollar in the last month to a new wave of capital repatriation to redeem assets at home.
Asian equity fund outflows resumed and reached US$509 million last week on concerns about the deteriorating global financial situation, Citigroup Global Markets said in a client note on yesterday, citing statistics compiled by EPFR Global, a Cambridge, Massachusetts-based fund research firm.
Month-to-date, the region saw net capital outflows of US$223 million, compared with net inflows of US$404 million last month and US$208 million in December, the Citigroup note said.
Chou said Taiwan had outperformed South Korea in exports to Japan and Germany in 2007 despite a sizable deterioration in the value of the won.
The monetary regulator acknowledged, however, that over-concentration of high-tech products and a lack of branding made Taiwan more vulnerable to dropping demand than South Korea.
The top two products accounted for 44.7 percent of Taiwan’s exports in 2007 while South Korea’s weighed 34.1 percent, Chou said.
Last year, South Korea posted a 13 percent gain in exports while Taiwan edged up 3 percent, Chou said, attributing the gap to South Korea’s ability to diversify its export products.
“It seems the government could make a greater effort in encouraging firms to diversify their products and create their own brands,” Chou said.
The NT dollar opened at NT$34.628 and touched NT$34.80 during trading. Turnover was US$7.22 billion on the Taipei Forex and US$3.84 billion on the smaller Cosmos Foreign Exchange, for total transactions of US$1.106 billion, data from the two companies showed.
A dealer who declined to be named said the NT dollar would hover between NT$34.50 and NT$34.80 for one or two weeks before sinking to the NT$35 threshold, reflecting economic woes.