The Council for Economic Planning and Development said yesterday that the US government’s move to gradually scale back its quantitative easing policy would have a limited impact on Taiwan’s economy.
However, the change in US monetary policy could affect some Southeast Asian countries, which in turn might have an indirect effect on Taiwan, Council for Economic Planning and Development Minister Kuan Chung-ming (管中閔) said.
In light of the close relations between Taiwan and Southeast Asian nations, Taiwan should pay extra attention to the possible effects of currency fluctuations, he said at a press conference following a weekly Cabinet meeting.
In Taipei trading yesterday, the value of the New Taiwan dollar fell the most in seven months, while the benchmark TAIEX rose slightly, up 0.7 percent, or 58.36 points, to close at 8,407.40 points.
“The announcement made by the US Federal Reserve can minimize uncertainty in the market, allowing stock and foreign exchange markets to react accordingly,” Council for Economic Planning and Development Chief Secretary Kao Shien-quey (高仙桂) told a separate press conference.
In what is seen as the beginning of an exit from quantitative easing, the Fed announced on Wednesday that it would cut back its monthly bond-buying program by US$10 billion to US$75 billion, starting next month.
The US central bank said it would maintain its low interest rates until the unemployment rate declines to below 6.5 percent.
Kao said the Fed’s announcement conveyed a message that a recovery in the US economy is evident, which would benefit Taiwan’s economy.
Minister of Finance Chang Sheng-ford (張盛和) said yesterday a recovering US economy could serve as a driver for Taiwanese exports.
In the first 11 months of this year, the US accounted for 10.7 percent of the nation’s total exports, making it the second-largest destination after China, which has 39.5 percent.
Financial Supervisory Commission Chairman William Tseng (曾銘宗) said that despite the gradual reduction in bond buying by the Fed, interest rates in the US are unlikely to go up sharply any time soon, so Taiwanese interest rates are also expected to remain stable in the short term.
Speaking at a meeting of the legislature’s Finance Committee in Taipei, Tseng said there is little room for local interest rates to move higher in the short term as Taiwan remains awash with liquidity.
However, the news from the Fed led to currency fluctuations in Asian countries, including Taiwan.
The NT dollar fell NT$0.2 to NT$29.945 against the greenback yesterday, marking the biggest slide since May 10 and the weakest level since Sept. 6, Taipei Forex Inc’s data showed.
However, the central bank said in a statement that the local currency’s exchange rate remains relatively steady.
Data provided with the central bank’s statement showed that the NT dollar fell 0.67 percent against the greenback from a day earlier. The decline compared with the Japanese yen’s 0.93 percent fall, the South Korean won’s 0.83 percent decline, the Australian dollar’s 0.62 percent fall and a 0.01 percent decline for the Chinese yuan.