The central bank on Tuesday said that it would continue to communicate with US authorities after a US Department of the Treasury report showed that Taiwan is close to being placed on its currency monitoring list.
The central bank said that Taiwan and the US have already established a communication channel to ensure that Washington has a better understanding of Taipei’s foreign-exchange market.
In the semiannual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners of the United States released on Monday, Taiwan stayed off the US currency monitoring list, but it said that Taipei is “close to triggering key thresholds” to be put on the list.
Taiwan was removed from the list in October 2017, which the bank attributed to its efforts to reduce currency intervention.
However, the US Treasury report said that Taiwan “may have engaged in substantial undisclosed foreign exchange intervention in the swap market,” referring to an analytical report from the US Council of Foreign Relations.
According to the US Treasury report, Taiwan has conducted about US$130 billion — and perhaps as much as US$200 billion — in undisclosed foreign-exchange intervention in the swap market.
Moreover, Taiwan is the only major Asian economy that does not published data on the full details of its international reserves consistent with IMF standards.
Central bank Governor Yang Chin-long (楊金龍) said the bank has never intervened in the swap market.
The bank added that it would continue to communicate with the US to make clear its position on the foreign-exchange market.
Since the US Treasury has clear definitions on currency manipulation, Taiwan has closely followed that criteria to ensure it stays off the monitoring list, it said.
The US uses three criteria to determine currency manipulation: economies that have a significant bilateral trade surplus with the US, a material current account surplus and are persistently involved in one-sided currency intervention.
An economy is removed from the monitoring list when it meets just one of the three criteria in two consecutive US currency reports.
The bank said it respects market mechanisms for determining the local currency’s value, but when a sudden massive inflow of foreign funds causes havoc in the market, it would step in to maintain order.
With more foreign funds entering the local market, the US dollar has been on a downtrend against the New Taiwan dollar over the past few months.
On Monday, the greenback fell below the NT$30 mark to close at a 19-month low of NT$29.952.
On Tuesday, it dropped further to NT$29.942 against the NT dollar before recovering to close at NT$29.950 yesterday.
The US Treasury report reviewed and assessed the policies of Washington’s 20 major trading partners.
After the review, the US Treasury dropped China as a currency manipulator, saying Beijing has made “enforceable commitments” not to devalue the yuan and has agreed to release exchange-rate data.
China had been placed on the currency monitoring list along with nine other economies: Germany, Ireland, Italy, Japan, Malaysia, Singapore, South Korea, Switzerland and Vietnam.
The report came just before Washington and Beijing were scheduled yesterday to sign a “phase one” trade deal to resolve their disputes.
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