Sun, Apr 16, 2017 - Page 1 News List

Taiwan remains on US currency monitoring list

NO LATE SESSIONS:The central bank has not been jumping into late trading sessions, analysts said, so one-sided intervention was not a factor in the US report

Staff writer, with CNA

The US Department of the Treasury has kept Taiwan on its “currency monitoring list” as Washington on Friday released its Foreign Exchange Policies of Major Trading Partners of the United States report.

It is the third time that Taiwan has been on the list in the twice-yearly report since the US began including it in April last year.

However, the Treasury Department did not name Taiwan as a currency manipulator, with the administration of US President Donald Trump declining to name any major trading partner as a currency manipulator.

The central bank yesterday said that the listing was expected, so it is unlikely that it will adversely affect the foreign-exchange market.

Central bank Department of Foreign Exchange Director-General Harry Yen (顏輝煌) said that the bank had established an effective communication channel with the Treasury Department and would express its opinions about the department’s concerns over the New Taiwan dollar exchange rate.

The department also kept China, Japan, South Korea, Germany and Switzerland on the list.

The department releases the report in a bid to implement new provisions of the US Trade Facilitation and Trade Enforcement Act of 2015, also known as the Customs Bill.

The provisions of the act provide the US government with monitoring tools to address “unfair” currency practices.

The report uses three criteria — a significant bilateral trade surplus with the US; a material current-account surplus; and involvement in persistent one-sided intervention in the foreign-exchange market — to determine whether a trading partner is to be named a currency manipulator.

Taiwan met one of the three criteria in the latest report, with Taipei still having a large current-account surplus, the central bank said, but it did not engage in persistent one-sided currency intervention.

In the previous report, Taiwan met both criteria.

“Taiwan has a track record of asymmetric foreign-exchange interventions, highlighting the urgency of the authorities limiting foreign-exchange intervention only to circumstances of disorderly exchange-market conditions and making foreign-exchange operations more transparent,” the report said.

Market analysts said that the central bank has not been jumping into the trading floor during late sessions to keep the NT dollar down — as it had done regularly in the past — which is why the Treasury Department did not accuse Taiwan of persistent one-sided intervention.

As the central bank has been reluctant to intervene in recent sessions, the NT dollar appreciated more than 6 percent against the greenback in the first quarter this year, which sparked an outcry from export-oriented firms, particularly in the high-tech sector, which incurred large foreign-exchange losses in the three-month period.

When Taiwan meets only one of the three criteria for two reports in a row, it will be removed from the list, the central bank said.

However, it is not easy for Taiwan to be removed, as the nation has a small and open economy, and tends to post a large current-account surplus, it said.

Additional reporting by Reuters

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