In an unusual move, central bank Governor Perng Fai-nan (彭淮南) yesterday reiterated in a letter to the public that the bank’s responsibility is to maintain the dynamic stability of the New Taiwan dollar’s rate and do what is best for the majority of Taiwanese companies, not just a few.
Perng made the remarks after various media outlets reported that some people have urged the central bank to help the NT dollar depreciate by NT$1 or NT$2 versus the greenback, while others said the nation’s currency should appreciate rather than depreciate.
“Supply and demand on the foreign currency market decide the NT dollar’s exchange rate,” Perng wrote in the letter.
Perng said Taiwan is a small and open economy that adopts a strategy of maintaining a dynamically stable currency rate.
That means that the central bank has to follow this strategy and seek the biggest benefits for the overall economy, Perng added.
Last month, he reported on the same topic to the legislature’s Finance Committee, disputing comments by Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) chairman Morris Chang (張忠謀) that the NT dollar should depreciate more to strengthen Taiwanese export companies’ profitability.
Following Perng’s announcement, the New Taiwan dollar dropped NT$0.029 to close at NT$30.009 against the US dollar in Taipei yesterday, the lowest since Aug. 29, when the unit traded at NT$30 against its US counterpart.
It was the 10th straight day that the NT dollar depreciated against the US dollar, the longest session in five years, Taipei Forex Inc tallies showed.
Combining trading volume of Taipei Forex Inc and the smaller Cosmos Forex Inc, daily turnover remained steady at US$1.11 billion yesterday.
The Yuanta-Polaris Research Institute (元大寶華綜合經濟研究院) said the NT dollar may maintain a relatively weak pace versus the greenback in the near future, following the US government’s announcement last week that it would gradually scale back its quantitative easing measures.
Other major Asian currencies, such as the yen and yuan, may record a similar trend versus the US dollar as the NT dollar in the short run, the institute said.