Oliver Williamson, last year’s Nobel Prize winner in economics, said yesterday that China’s recent move to break its currency’s two-year peg to the dollar could lead Taiwan to adjust its monetary policy.
Responding to a Taipei Times’ question, Williamson said: “As for Taiwan having to respond to changes in monetary policy in China, I expect this is true.”
He didn’t elaborate when asked whether the central bank should therefore raise interest rates in its board meeting on Thursday.
Williamson, who specializes in transaction cost economics, is scheduled to give talks on economic and financial regulation amid a global economic recovery in Taichung and Taipei today and on Thursday respectively.
The revaluation of the Chinese currency came under pressure from the US and other economies, and this would correct trade imbalances facing the world’s second-largest economy, Williamson said.
Also speaking at the press conference, Lin Joung-yol (林炯垚), dean of the College of Management at Asia University, said that the yuan’s appreciation should be considered a “normal practice” as any long-term trade surplus or deficit had to be adjusted.
“Whether or not the Taiwan New dollar [NT dollar] will follow suit in appreciating is worth observing,” Lin said, as Taiwan maintains a close relationship with China in manufacturing products exported to Europe.
Yesterday saw an influx of foreign funds into Asian currencies, amid expectations that China’s decision at the weekend to make its currency flexible would send the yuan rising.
In Taiwan, the NT dollar rose to a day’s high of NT$31.72, from Friday’s closing of NT$32.19, before edging down to close at NT$31.99, up 0.59 percent, and the highest in a month, following the central bank’s intervention.
Tarsicio Tong (湯健揚), a currency trader at Union Bank of Taiwan (聯邦銀行) in Taipei, said by telephone that the central bank didn’t go so far as to push the NT dollar to depreciate, indicating the monetary regulator still wanted the currency to rise.
“Apparently, the central bank has no intention of letting the NT dollar depreciate as it hopes the currency will rise orderly and moderately. This means that the central bank is following market expectations,” Tong said.
Turnover was US$1.137 billion at Taipei Forex Inc. Including turnover at the smaller Cosmos Foreign Exchange Inc, total trading transactions were US$1.7 billion yesterday.
The trader predicted that the local currency would rise to around NT$31.60 against its US counterpart in trading today and close at between NT$31.80 and NT$31.90.
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