A stronger US dollar is taking a toll on the local currency by fueling volatility on local financial markets and adding pressure to imported inflation, a phenomenon the central bank will address at its quarterly board meeting next month, central bank Deputy Governor Yen Tzung-ta (嚴宗大) said yesterday.
As of yesterday, the New Taiwan dollar had tumbled 7.51 percent against the greenback this year, as the US Federal Reserve tightens to curb inflation.
Since the beginning of the year, the TAIEX has shed 12.32 percent as global funds retreated from Taiwan and other emerging markets in the pursuit of better yields elsewhere.
Photo: Lo Pei-der, Taipei Times
The weighted index yesterday closed 1.7 percent lower at 16,020.32 points, Taiwan Stock Exchange data showed.
“The trend not only weighed on the NT dollar, but also hit the currencies of other emerging economies and augmented their debt problems,” Yen told a meeting of the legislature’s Economics Committee.
Yen refused to be pinned down about the central bank’s policy intentions, only saying that the board meeting on June 16 has the final say on the matter.
Consumer prices and the inflation outlook sit atop the central bank’s list of concerns, while the job market and GDP growth would also guide the decisionmaking process, he said.
Taiwan’s consumer prices are forecast to pick up by more than 2 percent this year after rising faster than 3 percent in the past two months, mainly due to spiking international energy and commodity prices, the deputy governor said.
Inflationary pressures could ease in the second half of the year alongside a receding base effect, he added.
The US and Europe have to make drastic policy moves to bring down inflation induced by their money-printing programs to shore up their economies amid the COVID-19 pandemic, Yen said.
Inflationary readings are relatively moderate in Taiwan, giving policymakers room to look at things from a different perspective, he said.
Central bank Governor Yang Chin-long (楊金龍) last week said that Taiwan might have difficulty achieving a GDP growth of 4 percent this year, as worsening inflation, global monetary tightening and the Ukraine war could hurt exports and corporate profit from the second half of the year.
Yen agreed, saying that resurgent virus outbreaks worldwide pose further uncertainty.
Surging daily cases of the Omicron variant of SARS-CoV-2, which hit 90,331 yesterday, have prompted people to stay home, slowing recovery for sectors reliant on domestic demand.
Yen hinted that the central bank might intervene in the local foreign exchange market to help stabilize the NT dollar.
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