The central bank said yesterday that the local currency is ill-suited to fund carry trades because overseas investors are restricted from borrowing the currency, and lower interest rates can be found in places like Hong Kong and Japan.
The bank made the comments in response to media reports that the local currency has become a favorite among investors in Asian markets because of the bank’s loosening monetary policy.
Bloomberg News reported yesterday that a looser monetary policy from Taiwan’s central bank was helping the New Taiwan dollar provide the best returns on carry trades in Asia.
The views prompted a rare statement of clarification from the central bank.
“The report represented the media outlet’s subjective view,” the bank said in the statement yesterday.
The interest rate for a one-year time deposit in Taiwan stands at 1.355 percent, higher than in many other major global economies, the bank said.
The rates in Hong Kong and Japan are 0.05 percent and 0.25 percent respectively, according to the bank’s statement.
The bank said that foreign investors could not borrow NT dollars freely and use them invest in foreign currencies with higher interest rates, adding that the trades described in Bloomberg’s report were not feasible.