New Taiwan dollar falls to a 5-year low
China’s devaluation, monetary easing identified as key causes
The New Taiwan Dollar fell to a five-year low yesterday over the Central Bank’s ( ) monetary easing and China’s surprise 1.9-percent devaluation of the yuan, according to Taipei Forex Inc. ( ).
On Tuesday, the People’s Bank of China slashed the yuan’s fixing by nearly 2 percent in a bid to boost Chinese exports and lift its struggling economy.
It marked the yuan’s largest single- day loss since the mid-1990s and bumped up the greenback while sending most currencies in Asia sliding.
Taiwan’s currency fell NT$0.320 — or 1 percent — to finish at NT$32.080 against the U.S. dollar, its weakest point since September 2010 and the greatest depreciation since Jan. 28, 2013. Also on Tuesday, Taiwan’s Central Bank lowered the interest rate on overnight certificates of deposit from Monday’s 0.388 percent to 0.386 percent, fueling a surge in bonds.
The move came after disappointing economic data from the second quarter, including six straight months of exports contraction and a slim 0.64 percent gain in gross domestic product (GDP).
Prior to Tuesday’s cut, rates for overnight certificates of deposit had been kept stable near the previous day’s 0.388 percent for about three years.
Business Leaders Tout Boost
The Chinese National Federation of Industries (CNFI,
) hailed the New Taiwan Dollar’s depreciation against the U.S. dollar, saying it could jumpstart Taiwan exports.
The sharp currency devaluation would make Taiwan exports appear to be cheaper and more competitive, the association said.
“The depreciation of the New Taiwan Dollar is absolutely healthy for Taiwan,” said CNFI President Lai Cheng-i ( ).
Tsai Lian-sheng ( ), the business chamber’s secretary general, cautioned that a devalued currency is only a shortterm solution.
Many factors affect import and export performance, Tsai said, stressing that Taiwan’s long-term economic health depends on the state of the global economy and the state of its information and communications technology (ICT) sector.
The tech sector currently suffers from large inventories and time is needed to absorb those, he said.
It also faces a serious threat from China’s emergent supply chain, which has decreased Chi- nese dependence on Taiwan’s parts and components, Tsai said, stressing Taiwan needs to press harder for entry to regional trade blocs to rescue exports.
Limited Impact on Banking
Exchange analyst Chen You-zhong ( ) told the Central News Agency that the yuan depreciation’s impact on Taiwanese banking customers will be limited.
Though it is likely that the yuan will depreciate further, the typical Taiwanese investor should see a limited negative impact because Taiwan and China’s currencies tend to see a high degree of correlation, Chen said.
Asustek Computer Inc ( ), which holds yuan-denominated assets, said the firm sees a cause for concern only if the yuan’s depreciation continues.
Tuesday’s reduction is in the “tolerable range” between 1 and 2 percent and can be managed, a company representative said.