Fri, Mar 03, 2017 page12

• Perng urges US to remove NT dollar from watch list

  CHANGES: Given that Taiwan’s trade surplus with the US has shrunk and the NT dollar has rapidly appreciated, Taiwan should not remain on the list, Perng Fai-nan said

  • By Crystal Hsu / Staff reporter
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  The US should remove Taiwan from its currency watch list next month, as the value of New Taiwan dollar rose rapidly this year and much of the increase in the nation’s foreign-exchange reserves came from interest yields, instead of trading gains, central bank Governor Perng Fai-nan (彭淮南) said yesterday.

  “I am confident that Taiwan will not, and should not, remain on the currency monitoring list, if the US applies the same criteria from October last year,” Perng told the legislature’s Finance Committee.

  Lawmakers voiced concerns about tension with the US as the world’s largest economy has accused the central bank of intervening in the market to stem the NT dollar’s rise in a bid to help Taiwanese exporters.

  

  Central bank Governor Perng Fai-nan gestures during a question-and-answer session at a meeting of the Finance Committee at the Legislative Yuan in Taipei yesterday.

  Photo: Chien Jung-fong, Taipei Times

  Taiwan is home to the world’s largest contract chipmakers, chip designers and makers of electronic components used in smartphones, personal computers, connected vehicles and Internet of Things applications.

  The US Department of the Treasury is due to update its currency monitoring list next month. The criteria it used to back currency manipulation charges include a trade surplus of more than US$20 billion, a current account surplus in excess of 3 percent of GDP and an increase in foreign exchange reserves that is more than 2 percent of GDP.

  Thanks to a trade surplus shrinkage, Taiwan is likely to fail only the latter two tests this year, but Perng said that much of foreign-exchange reserves gains came from interest income.

  “Foreign-exchange reserves may increase through currency trading or interest income accumulation... The US had underestimated the size of interest income” in Taiwan’s case, Perng said.

  In addition, the local currency has appreciated quickly this year, having risen 4.83 percent against the US dollar as of Tuesday last week, making it the best performer next only to the South Korean won, Perng said.

  The NT dollar’s quick advance shows no sign of central bank intervention, Perng said, adding that the local currency has held relatively stable these days without abrupt falls toward the end of trading sessions.

  Perng attributed the NT dollar’s appreciation to foreign funds inflows of US$5 billion to Asia this year, with Taiwan absorbing US$3 billion.

  The governor warned against a trade war, saying it would not benefit either party.

  The US is a major exporter of refined petroleum, cars, vehicle parts and agriculture, among other things, he said.

  Macquarie Group Ltd reached other observations, saying Taiwan may have seen capital repatriation by Taiwanese firms and individuals from across the Taiwan Strait.

  Taiwanese businesspeople have shut down factories in coastal China or moved capital home to cope with risks related to the yuan’s depreciation and aggressive tax investigations by the Chinese government, the Sydney-based firm said in a note on Wednesday.

  Despite the capital inflows, the central bank said it did not see funds flowing to the local property market, as luxury homes continue to find it difficult to secure buyers.
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