Central bank says it won't devalue NT$

The nation's central bank said it wouldn't push the currency lower to help an economy battered by falling exports and record unemployment.

The bank has never considered regulating the New Taiwan dollar's value to boost growth, Deputy Governor Hsu Yi-hsiung (徐義雄) said yesterday.

While a weaker currency may make Taiwan's exports cheaper for overseas buyers, the benefits could be offset by similar moves in other Asian countries.

"What kind of attitude would other countries have to the currency's fluctuation?" Hsu said.

"If depreciation were used as a policy tool, then its effectiveness would be canceled out."

The nation's economy grew just 1.1 percent in the first quarter from a year earlier, the slowest pace in 26 years, as overseas buyers cut orders for computer chips, mobile phones and other goods.

To boost lending and investment and counter the impact of a jobless rate that rose to a record 4.4 percent in May, the central bank has cut interest rates seven times since December.

The NT dollar has weakened 4.2 percent against the US dollar since the beginning of this year.

That may not be enough to boost Taiwan's exports, which make up about half the economy, as other regional currencies fall even more.

The Thai baht has weakened 4.3 percent this year, while the Singapore dollar has fallen 5.1 percent, the Philippine peso has dropped 5.5 percent while the Japanese yen has slid around 10 percent.

Taiwan's currency may need to fall further to keep pace with its neighbors', some analysts have said.

"Given the dependency of the economy on exports, it won't hurt to let the Taiwan dollar go," said Damian Gilhawley, an economist at China Securities Co.

"It does have room to fall vis-a-vis its competitors," he said.

That will probably happen even without direct intervention from the central bank, Gilhawley said.

"If you allow the market to decide, it will pull the Taiwan dollar down," he said.

Still, some analysts expect the central bank to hold the line at 34.500 to the greenback.

The NT dollar closed yesterday at 34.473, slightly weaker from 34.465 the day before.