Taiwan's central bank has a message for those who say the nation's currency is headed lower: Keep quiet.
``Banks are free to advise clients about their predictions of the Taiwan dollar,'' said Hsu Yi-hsiung (徐義雄), deputy governor of the Central Bank of China. "But we object to expressing views to the press to create a trend."
That trend, many analysts say, is down. The Taiwan dollar has fallen 6 percent against the US dollar in three months, making it Asia's second worst-performing currency after the Philippine peso. It will weaken another 4.9 percent to NT$36.82 by the end of the year, according to an average forecast of analysts surveyed.
Taiwan is keen to bolster its currency, encouraging more foreign investment: The economy is growing at its slowest pace in a quarter-century, the TAIEX stock index is half the level of a year ago and exports are slowing.
There are signs, however, that the Taiwan dollar may keep falling. A year ago, US dollar deposits made up 3.6 percent of all Taiwan's bank deposits, according to Deutsche Bank.
Now, they account for 6 percent.
All that explains why Taiwan is trying to dampen speculation that its currency may weaken further. The central bank "has been telling people to be quiet about their predictions for the Taiwan dollar if they forecast a depreciation," said Simon Chao, who manages NT$700 million (US$20 million) at President Investment Corp (統一投資).
To buttress its views, the central bank faxed four currency forecasts to news agencies yesterday. All said the Taiwan dollar will rally.
"The media seem to be trying to conspire a falling Taiwan dollar trend," Hsu said. "Therefore, we are providing information to the media to generate more balanced news reports for the public." The most optimistic, by Global Finance magazine, put the dollar at NT$33.50 by Sept. 30, 4.4 percent stronger than where it is today. It was recently unchanged at NT$35.02 to the US dollar.
Consensus Economics Inc, which questions hundreds of econ-omists each month, the Economist Intelligence Unit's survey of analysts at banks and companies, and Academia Sinica also said the currency will rally.
Taiwan has a history of warning against forecasting declines for its currency.
In November, the central bank said a forecast by Hong Kong & Shanghai Banking Corp Holdings Plc (HSBC,
After meeting officials with the central bank, HSBC told its analysts to refrain from making public comments on the currency, according to analysts at the bank.
"It's an open secret that the central bank keeps a close eye on economic and currency comments by analysts," said Winnie Tiao, who helps manage NT$16 billion in investments at Grand Pacific Securities Investment Trust Ltd (中信投信).
For now, however, the central bank is hoping analysts keep their views to themselves.
"At this point," Hsu said, "We believe silence is golden."
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