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Central bank releases open letter to public covering exchange rates

TAIPEI, Taiwan -- In a rare move, R.O.C. Central Bank Governor Perng Fai-nan (彭淮南) yesterday released an open letter to the public explaining that foreign exchange rates are determined by the whims of international markets and not by decisions issued by his office.

In the letter, Perng reiterated that the central bank's primary goal is to maintain Taiwan's monetary stability amid the influences of fluctuating international markets. According to Perng, foreign exchange rates represent a price set by international markets depending on the principles of supply and demand. The central bank's duties are to initiate stabilization measures amid extraordinary volatility in the strength of the New Taiwan dollar.

Perng stated that, however, due to the complexity of factors affecting exchange rates, the Central Bank does not have the power to determine the value of the local currency. Perng stated that the Central Bank is unable to comply with recent requests by industry heads to depreciate the New Taiwan dollar by NT$1 to NT$2 against the greenback, nor with those who call for strengthening the local currency.

According to Perng, Taiwan is a small and open economy, and the nation's prosperity is reliant on a sound and stable monetary policy. Perng also noted that his office's efforts have been recognized and commended by the “big three” international credit rating agencies, the International Monetary Fund, and economic experts both in Taiwan and abroad.

Meanwhile, with the end of the Fed's quantitative easing measures approaching, prospects of the greenback's likely strengthening has driven down the value of the New Taiwan dollar, which opened at NT$30 against the dollar during yesterday's trading, a new low not seen since September.

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