The country's central bank will probably leave interest rates unchanged at its quarterly policy meeting today on concerns lower rates will drive the currency, already close to five-month lows, down further.
The central bank is not expected to change its key rediscount rate, charged to commercial lenders for 10-day loans -- currently at a record low 2.25 percent -- according to six out of seven economists surveyed by Bloomberg. The bank may announce a decision today at 5pm.
The bank has slashed interest rates 2.5 percentage points since December last year to shore up lending and investment as exports tumble.
The New Taiwan dollar took a tumble as the Japanese yen plunged to a three-year low this week, raising concerns that buyers of electronic goods may be attracted to Japanese brands instead of those from Taiwan.
"If the central bank lowers interest rates it will certainly hurt the Taiwan dollar and the bank certainly doesn't want the currency to depreciate further,'' said Cheng Yi-sheng, who helps manage about NT$1.5 billion (US$43 million) in investments at Taiwan Securities Ltd (
The NT dollar has dropped 1.6 percent against the US dollar in the past month, the world's 10th-worst performing currency.
Still, on Monday the local media reported the central bank may lower interest rates by 12.5 basis points if the NT dollar stabilizes.
Robert Subbaraman, an economist at Lehman Brothers Japan Inc, the only economist surveyed who forecast a rate cut, said the depressed economy needs another easing of lending rates to stimulate business activity.
The nation's economy contracted 4.2 percent in the third quarter from a year earlier as exports tumbled, falling into its worst slump since the 1970s.
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