The New Taiwan dollar may have to depreciate by another 10 percent against the US dollar if the government wants to increase the nation’s export competitiveness, bank officials said.
As export orders continue to shrink on faltering overseas demand, many Asian countries have allowed their currencies to fall in an attempt to revive exports, officials said.
The NT dollar has fallen by a smaller degree compared with other currencies in the region, they said.
A state-run bank official said Taiwan could follow the trend, as even China has allowed the yuan to depreciate to boost its exports.
The South Korean won has depreciated by 37 percent against the US dollar so far this year, while the Australian and New Zealand currencies are down by more than 30 percent and 26 percent respectively.
In Taipei trading yesterday, the NT dollar fell NT$0.022 to close at NT$33.55, a five-week low against the US currency.
The expected slowdown in exports is “weighing on the currency,” said David Cohen, director of Asian forecasting at Action Economics in Singapore. “Taiwan is in the same boat with [South] Korea and Japan,” with exports slowing.
The NT dollar has been fluctuating within a narrow range recently and has depreciated by 3.4 percent so far this year as a result of the central bank’s intervention to stabilize the local currency.
Currency dealers said the central bank was sticking to its old policy of ensuring a stable currency despite the global financial storm.
But with their Asian rivals, especially South Korea, allowing their currencies to depreciate to shore up exports, dealers warned that Taiwanese exporters may suffer if the NT dollar remained high.
If the government wants to protect exports, allowing the NT dollar to fall by a further 10 percent would still be a reasonable range, they said.
Although the central bank has continued lowering its benchmark interest rate and moved its fourth-quarter board meeting ahead of the scheduled date to next Thursday, dealers said the economy had shown no signs of recovering, adding that the central bank needed to make better use of monetary policy to stimulate the economy.
They said if Asian currencies continued to depreciate and the central bank allowed the NT dollar to fall, the local currency could fall to NT$34 against the greenback by the end of the year.
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