The central bank yesterday blamed market speculation for the steep rise in the local currency, and urged exporters and financial institutions to stay calm and stop panic sell-offs to avoid hurting their own profitability.
The nation’s top monetary policymaker said that it would step in, if necessary, to maintain order and stability in the foreign exchange market.
The remarks came as the NT dollar yesterday closed up NT$0.919 to NT$30.145 against the US dollar in Taipei trading, after rising as high as NT$29.59 in intraday trading.
Photo: Tu Chien-jung, Taipei Times
The local currency has surged 5.85 percent against the greenback over the past two sessions, central bank data showed.
“Currency is not an issue on the agenda of the US-Taiwan trade talks,” central bank Governor Yang Chin-long (楊金龍) told an impromptu media briefing yesterday. “That is why the central bank is not taking part in the negotiations.”
Yang firmly denied the existence of a so-called Mar-a-Lago accord, which claims that the US has sought removal or lowering of “reciprocal” tariffs and currency appreciation in negotiations with trade partners to boost the competitiveness of US goods.
Photo: Screen grab from the Presidential Office’s Flickr page
The US side never floated the idea, Yang said, while acknowledging that Taiwan’s trade surplus with the US has widened in the past few years, due mainly to strong demand for chips, servers and other electronics used to develop artificial intelligence capability.
The ongoing spike in the local currency also has to do with Taiwan’s better-than-expected first-quarter GDP and emerging signs of weakness in US economy, which have spurred global capital to redeploy and return to emerging markets, including Taiwan, Yang said.
The TAIEX has hovered at about 20,500 points after an earlier rout induced by fears of Washington’s drastic tariff hikes against major trading partners, he said.
Local exporters and financial institutions lent support to the NT dollar’s appreciation by dumping US dollar holdings, he said.
“By doing so in a stampede fashion, they [exporters and financial institutions] could incur losses and hurt themselves,” Yang said.
Accurate or not, market speculation could cause serious harm to the local bourse, industry and the overall economy, as seen by the stock retreat yesterday, with heavy losses in financial shares, he said.
The TAIEX yesterday shed 1.23 percent, or 254.65 points, to 20,532.99 even though foreign institutional players net bought NT$24.46 billion in shares, Taiwan Stock Exchange data showed.
Allegations that local financial companies have trillions of US dollars of exposure to US bonds and could experience serious assets impairments are exaggerated, Yang said.
“The central bank will try its best to maintain order and stability in the market,” he said, without elaborating.
President William Lai (賴清德) said market expectations that the local currency would continue strengthening and foreign fund inflows to invest in local stocks have fueled the NT dollar’s recent rise.
However, some politicians are misleading the public by excessively speculating on the cause of the NT dollar’s appreciation, he said in a videotaped message.
Lai reiterated that as the central bank and the Office of Trade Negotiations have said, the issue of exchange rates was not involved in the first phase of Taiwan-US tariff negotiations.
The administration would adhere to the principle of “ensuring national interests and sustaining industrial developments without sacrificing any industry” at critical moments during Taiwan-US trade talks, he said, adding that he expects the public to work together with a reasonable attitude toward the changing international economic and trade situation.
Additional reporting by staff writer and CNA
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