In Stanley Fischer, the US Federal Reserve would gain a financial statesman with contacts and credibility around the world as it begins to pull back on record stimulus, possibly unsettling foreign markets.
Fischer, 70, was picked on Friday to be the Fed’s vice chairman just as US officials start to slow bond purchases. The tapering and eventual monetary tightening could roil emerging markets as higher rates there pull investment flows from higher-yielding, higher-risk stocks and debt.
US Fed Chairman Ben Bernanke acknowledged the potential fallout in September last year, saying, “we are watching those developments very carefully.”
Fischer has spent much of the past 25 years near the top of global economic policymaking, helping arrange bailouts for Mexico and Brazil while he was the No. 2 official at the IMF in the 1990s. If approved by the US Senate, he would bring experience that can help the Fed monitor the impact of its policies abroad and make him an ambassador who explains the US central bank’s intentions and goals.
“Here is a guy who trained half of the central bankers in the world. He knows them,” said former Fed Vice chairman Donald Kohn, a senior fellow at the Brookings Institution.
Fischer “is tremendously respected everywhere in the world, not only by central bankers, but by finance ministers and prime ministers,” he said.
US President Barack Obama also asked Lael Brainard, formerly the US Treasury Department’s top international official, to fill an empty seat on the board and a current US governor, Jerome Powell, to serve a second term, according to a statement from the White House.
The selections come at a time when the global economic outlook remains clouded and US officials are seeking more cross-border coordination in regulating banks.
They also follow a trend by other governments to seek out leaders with international experience to help run their central banks.
The UK government appointed Canadian Mark Carney to run the Bank of England and Jon Cunliffe — who, like Brainard, is a former Group of Eight negotiator — to serve as one of his deputies.
Raghuram Rajan, hired last year as governor of the Reserve Bank of India, was previously chief economist at the IMF.
Graeme Wheeler, a former World Bank official, was hired in 2012 to be governor of the Reserve Bank of New Zealand.
“Their knowledge and awareness of international economies and markets and familiarity with international policymakers is an argument in favor of them,” said John Lipsky, a former first deputy managing director of the IMF, adding they also had other qualifications.
The MSCI Emerging Markets index touched a four-month low last week as capital flows shifted in the wake of the Fed’s decision to trim its longer-term bond purchases on Dec. 18. The index increased 0.7 percent on Friday to 970.15, paring its drop for the week to 1 percent.
The measure for emerging-market stocks has dropped 3.3 percent this year after trailing shares in developed countries by the most since 1998 last year.
“Many in emerging markets and particularly their central banks are increasingly concerned about what the Fed is doing and how this pullback will happen,” said Thomas Costerg, a financial markets economist at Standard Chartered PLC in New York.
Obama is reshaping the Fed board as the US central bank tackles some of the biggest challengesit has faced in its 100-year history.
Fischer would replace Janet Yellen, who was approved by the Senate this week for the chairmanship of the US central bank. Bernanke’s term expires on Jan. 31.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The New Taiwan dollar and Taiwanese stocks surged on signs that trade tensions between the world’s top two economies might start easing and as US tech earnings boosted the outlook of the nation’s semiconductor exports. The NT dollar strengthened as much as 3.8 percent versus the US dollar to 30.815, the biggest intraday gain since January 2011, closing at NT$31.064. The benchmark TAIEX jumped 2.73 percent to outperform the region’s equity gauges. Outlook for global trade improved after China said it is assessing possible trade talks with the US, providing a boost for the nation’s currency and shares. As the NT dollar
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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