Weakening yen, won pose dilemma for Perng: experts
The China Post news staffTAIPEI, Taiwan -- The question of how Taiwan can win out amid Japan and South Korea's currency depreciation measures will test central bank chief Perng Fai-nan, experts said yesterday.
January 24, 2013, 11:44 am TWN
They made the remarks as the local unit yesterday closed up NT$0.003, to finish at NT$29.092 against the greenback, on trade volume of US$662 million.
Japan has acted to devalue its currency in an effort to help its exports. The country recently announced plans to print an unlimited sum of yen, which is set to flow into different markets in the region. The inflow of yen will result in currency appreciations among Asian nations, including South Korea.
South Korea, which has already felt the pressures of this influx, has launched various measures, including interest rate cuts as part of helping industries hardest hit. The country is also set to intervene in the currency market to keep the won at a low.
The devaluation race presents an interesting dilemma for Taiwan's central bank, given Japan is Taiwan's biggest importer and South Korea is the island's biggest competitor.
Many of Taiwan's tech heavyweights, who make a living by exporting their products overseas, have urged central bank chief Perng to devalue the New Taiwan dollar to make exports more competitive.
For example, Morris Chang, chairman and CEO of Taiwan Semiconductor Manufacturing Co., has said that from 2007 to 2012, the local unit rose 9.9 percent, while the South Korean won weakened 17.9 percent. The won decline boosted the competitiveness of many Korean firms, which are now formidable competitors for Taiwan companies, he said.
Yet, a declining New Taiwan dollar will translate into a rising yen, which may create burdens for importers from Japan and result in import inflation. How the central bank will strike a balance between the opposing forces will test the wisdom of Perng, experts said.