Central bank Governor Yang Chin-long (楊金龍) yesterday reiterated that the bank would intervene in the foreign exchange market to maintain currency stability if necessary, but denied there is a so-called “Yang’s defense line.”
Yang made the statement at a meeting of the legislature’s Finance Committee where lawmakers from across party lines voiced concern over the New Taiwan dollar’s gradual, but steady decline against the US dollar.
“The central bank will step in when it spots abnormal fund movements that might threaten the currency market’s stability,” Yang told lawmakers.
Photo: CNA
The governor attributed the NT dollar’s performance to global fund outflows from Asian markets to take shelter in the greenback, after the US Federal Reserve last month said that it would keep interest rates up and for longer.
The NT dollar has fallen 5.01 percent against the greenback so far this year, a relatively stable showing compared with the yen’s 11.8 percent slump, the won’s 6.99 percent drop and the yuan’s 5.04 percent decline, Yang said.
Asian currencies saw greater corrections — from 7.67 to 25.66 percent — from 2017 to 2018 at the beginning of the US-China trade dispute when he had just assumed the governorship, Yang said.
The market has the final say regarding the local currency’s value, the governor said, adding that there is no so-called “Yang’s defense line,” although the market suspects that NT$32.4 is the level the central bank wants to maintain against the US dollar.
The NT dollar yesterday rose NT$0.003 from a day earlier to close at NT$32.325 against the greenback in Taipei trading, although it weakened to a seven-year low of NT$32.435 intersession, data from the central bank’s Web site showed.
Yang dismissed concerns that the US would put Taiwan on its watch list for unfair foreign exchange practices for supporting the local currency.
“The US Department of the Treasury frowns on interventions to thwart currency appreciation, but does not mind efforts to support the currency,” Yang said, adding that the US understands the importance of currency stability, and the central bank maintains good communication with the US.
Although Taiwan’s exports are taking a hit from a global slowdown, the nation has accumulated a trade surplus of more than US$20 billion, one of three criteria used by the US to weigh currency manipulation, Yang said.
Disappointing exports would weigh on Taiwan’s GDP and stock market, and foreign funds would move to realize capital gains whenever they see fit, Yang said.
Capital outflows have amounted to US$15.71 billion thus far, accounting for the rout on the TAIEX, he said.
The governor said fighting inflation remains the central bank’s top priority, but he is not overly worried about the second wave of inflation that is approaching.
It is unlikely that US consumer prices would reach new highs, even if international oil prices rise to US$100 a barrel, Yang said.
Rather, it would only slow the pace at which consumer prices return to the 2 percent target, he added.
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