Sat, Feb 06, 2016 - Page 14 News List

Taiwan steps up easing via market operations

DEPRECIATION PRESSURE FALLING:The easing comes after the BOJ’s negative rates, which, along with weak US data and stronger yuan fixing, bolstered the NT dollar


The central bank cut the rate on 14-day certificates of deposit in its second easing move in a week after the Bank of Japan’s (BOJ) adoption of negative interest rates supported the New Taiwan dollar.

The nation’s central bank lowered the rate on the debt it will offer in open-market operations on Feb. 16 to 0.26 percent from 0.29 percent on Feb. 2, the bank said in a statement.

That follows a reduction in the rate on overnight funds to 0.201 percent from 0.23 percent on Saturday last week.

While these rates are usually adjusted in conjunction with changes in the central bank’s benchmark rate, the monetary authority also eased funding conditions through market operations in August last year before its policy meeting in September last year.

The BOJ pushed interest rates below zero on Friday last week, spurring the biggest gain in the NT dollar since November last year as funds rushed into Taiwanese equities.

The NT dollar completed its third weekly gain as disappointing US data pushed down the greenback and China’s central bank strengthened its yuan fixing.

The local currency closed 0.3 percent stronger at NT$33.52 against its US counterpart, taking its advance since Jan. 30 to 0.4 percent, according to Taipei Forex Inc.

“Expectations for a further Fed rate hike are fading,” Fubon Financial Holding Co (富邦金控) chief economist Rick Lo (羅瑋) said. “A stronger yuan fixing also reduces depreciation pressure on the Taiwan dollar and other Asian currencies.”

Bond yields plunged to record lows this week as the reduction in the overnight rate on Saturday bolstered expectations the central bank will cut it benchmark discount rate when it meets next month.

Eleven of 19 economists surveyed by Bloomberg in the past two months expect another policy-rate cut next month, while the rest see benchmark borrowing costs being held at 1.625 percent.

The nation’s exports fell for 11 consecutive months through December last year and the economy contracted in the fourth quarter, adding to the case for further easing after two cuts to the policy rate in the second half of last year.

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