Mon, Sep 05, 2011 page12

• NT more stable than won: bank

  MANAGED FLOAT: Taiwanese regulators said they could not manipulate the value of the NT against the US dollar despite competition from South Korea’s products

  • By Jason Tan / Staff Reporter
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  The central bank yesterday said the New Taiwan dollar has been more stable than the South Korean won over the past three-and-a-half years, which has helped local exporters to reduce foreign exchange risk.

  The comments came after Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) chairman Morris Chang (張忠謀) last Friday criticized government agencies, including the central bank, of not doing enough to protect local companies from the impact of strong NT dollar gains against the US dollar.

  In response, the central bank said in an e-mailed statement that it was not allowed to control the foreign exchange rate and that the bank opted for the policy of keeping the local currency at a managed floating rate.

  In the more than three years since Dec. 31, 2007, the NT dollar’s fluctuation rate against the greenback was 4.15 percent, much tamer than the won’s rate of 14.51 percent, the statement said.

  As the won’s fluctuation rate was 3.5 times higher than that of the NT dollar, Taiwanese firms in fact enjoyed lower currency exchange risks and that boosted their export business, the central bank said.

  Chang said the foreign -exchange rate could make or break a company.

  He said the South Korean government had done a better job in capping the appreciation of the won against the US dollar to protect its companies over the past year.

  “As Taiwanese exporters book costs in New Taiwan dollars, the foreign exchange rate can affect their competitiveness,” Chang said.

  The Japanese government has also sought to ease the strains of a strong yen recently, not to mention Beijing’s tough stance on keeping the yuan steady even under massive pressure from the US, Chang said.

  Taiwan and South Korea -are competitors in similar categories of export products, and the central bank said it understood the concerns of Taiwanese companies, but said it could not manipulate the NT dollar because it had adopted a “managed floating” mechanism.

  Taiwan and South Korea are long-time rivals in the technology field.

  South Korean bigwigs such as Samsung Electronics Co and LG Electronics Inc manufacture products from handsets and LCD panels to chips and computers, products that are also manufactured by Taiwanese firms, including TSMC, HTC Corp (宏達電) and Acer Inc (宏碁).

  Although a stronger NT dollar can impact companies’ profitability, on the other hand, Taiwan enjoys imported goods at a cheaper rate and that helps stabilize prices of domestic consumables, the statement said.

  Taiwan’s Consumer Price Index (CPI) expanded 1.43 percent during the January to July period, compared to South Korea’s 4.4 percent, according to central bank statistics.

  Taiwan’s CPI climbed 0.96 percent last year, while South Korea’s advanced 2.93 percent. In 2009, Taiwan’s CPI contracted 0.87 percent, but South Korea’s rose 2.83 percent.

  The central bank said it would closely monitor the currency fluctuation, but intervention would only come when there are abnormalities such as huge capital inflow or outflow in the market that sends the NT dollar soaring or dropping on a great level.
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