The central bank said it is ready to establish a currency swap agreement with China, and although the two sides have not yet started formal consultations, it hopes to sign such a pact soon.
People’s Bank of China Governor Zhou Xiaochuan (周小川) on Tuesday said that he was aware Taiwan would like to discuss the issue.
Yuan-denominated deposits in Taiwan hit a new high of 214.522 billion yuan (US$34.94 billion) in January. Government data are expected to show that Taiwan’s yuan-denominated deposits last month set another record high, increasing the pressure for such a deal.
The central bank is set to release the latest data tomorrow.
Central bank Governor Perng Fai-nan (彭淮南) on Thursday last week said he hoped a currency swap deal could be finalized by the end of this year, but added that the issue is not just up to Taiwan.
While financial authorities have not set a cap on the amount of yuan deposits allowed to be held in this country, they have repeatedly advised banks to do their best to conduct risk control.
The reference rate for the yuan yesterday dropped by 0.16 percentage points from Tuesday to 6.1343 against the US dollar, the lowest level this year, according to data released by the Shanghai-based China Foreign Exchange Trading System.
Standard Chartered chief economist Tony Phoo (符銘財) said the recent yuan depreciation is a short-term adjustment because the currency had experienced a long period of appreciation that began in 2005.
In the long run, the yuan’s value will not increase on a large scale, while the short-term fluctuations are not likely to affect the globalization process of the currency, Phoo said.
However, the depreciation has affected yuan buyers in Taiwan, dealers said, adding that the market at present is dominated by a wait-and-see attitude.
The market is uncertain whether the yuan has depreciated to its lowest point, the dealers said, attributing the recent drop to the US dollar’s fluctuations and data on China’s macroeconomic performance.