The central bank yesterday reiterated its determination to stabilize the New Taiwan dollar and denied accusations from the US that it had intervened in foreign-exchange rates.
The comments came after the US Department of the Treasury on Friday put Taiwan, China, South Korea, Japan and Germany on a new monitoring list, citing a report saying that those nations’ foreign-exchange practices would be further monitored by the department to decide whether they are involved in intervention.
In the report, the US Treasury said that Taiwan has a material current-account surplus and engaged in net foreign-currency purchases during most of last year.
The report urged Taiwanese authorities “to limit foreign-exchange interventions to the exceptional circumstances of disorderly market conditions, as well as increase the transparency of reserve holdings and foreign-exchange market intervention.”
The bank said that it respects a market mechanism to decide the NT dollar’s value, but as Taiwan is a small economy, the bank has to take action to stabilize the currency to prevent it from being affected by “irrational” factors.
It said that it has a responsibility to stabilize the NT dollar, adding that without its efforts, Taiwan’s economy is likely to suffer.
According to the central bank, it has established an effective communication channel with the US Treasury and would express its opinions about the department’s concerns over the foreign-exchange rate.
The US action was disclosed in a report to the US Congress on Friday. The report, which by law the US Treasury must submit to Congress every six months, did not designate any nation as a currency manipulator, but the US Treasury did say it is employing new tools to more closely monitor actions of nations with which the US is running large deficits.
Under criteria the US Congress established earlier this year, the Treasury put the countries on a monitoring list that would trigger talks, but no economic penalties. However, if the discussions fail, the countries could face a greater threat of sanctions in the future, although those sanctions must win approval of the WTO.
The three criteria are the size of the US’ trade deficit with the nation, the size of the nation’s current-account trade surplus with all nations and the frequency with which the nation intervened in currency markets.
If a nation meets all three criteria, US law requires Washington to engage in “enhanced analysis” of the nation’s practices.
Taiwan was listed for its large current-account surplus and persistent purchases of foreign exchange last year, keeping the New Taiwan dollar low against the US dollar.
The US Treasury said that none of the five nations had met all three criteria, but all five meet two of the three, which is why they were placed on a “monitoring list.”
That would mean the US is likely to raise trade concerns as part of discussions that take place during gatherings, such as finance meetings of the G20 major economies.
Additional reporting by AFP
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