Fewer than two months after the nation was taken off the US’ currency watch list, some outside observers are suggesting that the central bank is getting more active in the foreign-exchange market.
Pronounced declines in the New Taiwan dollar near the close of trading over the past two weeks have spurred speculation that the central bank is weakening the exchange rate to help exporters.
The central bank has denied intervention, with Department of Foreign Exchange Director-General Harry Yen (顏輝煌) saying that the moves are determined by market forces alone.
For about a week last month, the NT dollar strengthened beyond NT$30 against the greenback, but slid sharply in late trade — reminiscent of a pattern that had caught the US Treasury’s eye in previous years.
The exchange rate has gained 0.5 percent in the past month, compared with 1.7 percent for export rival South Korea’s won.
This lag is due to “the usual reason of intervention,” Bank of Tokyo-Mitsubishi UFJ Ltd said.
The US Department of the Treasury in October removed the nation from its watch list, saying Taiwan was intervening less and met only one of three criteria it monitors.
The assessment might have been too narrow, said Brad Setser, a senior fellow at the US-based Council on Foreign Relations and a former deputy assistant secretary at the Treasury.
“Even if the intervention is somewhat below the threshold, in the context of renewed intervention, I would have wanted to have kept Taiwan on notice,” he said. “As the heat has come off, my sense is Taiwan has reverted to its old pattern.”
To Setser, Taiwan’s removal indicates weakness in the Treasury report, he said.
For instance, one of the criteria is a bilateral trade surplus with the US, which understates Taiwan’s exports of electronics parts to the US via China, Setser said.
The report also ignores the jump in Taiwanese insurers’ partly unhedged foreign investments, which might be a form of hidden intervention, he added.
“The Treasury should have sent a tougher signal,” Setser said.
The central bank has been said to limit trading before the close and use state-backed banks to influence levels, thereby reducing actual reserve accumulation, a factor monitored by the US.
“Perng is still on the watch — what did you expect?” Cliff Tan (陳仲華), Hong Kong-based East Asian head of global markets at Bank of Tokyo-Mitsubishi UFJ, said in a note, referring to central bank Governor Perng Fai-nan (彭淮南).
The NT dollar closed at NT$30.015 against the greenback yesterday in Taipei trading.
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