Taiwan dollar depreciation against US dollar hailed by local business leaders
December 28, 2013, 12:05 am TWN
Taipei -- Local business leaders Friday hailed significant depreciation in the Taiwan dollar against the U.S. dollar in recent sessions, hoping that a cheaper local currency will make Taiwan-made goods more competitive in the global market.
While positive on the exchange rate of NT$30.06 against the U.S. dollar as of closing Thursday, entrepreneurs cautioned that the Taiwan dollar should maintain itself at around NT$31.00 against the greenback or a sharper depreciation could prompt foreign investors to move funds out of the country.
Thursday marked the 13th consecutive trading session that the local currency depreciated in line with other neighboring currencies as foreign investors moved their funds out of the region.
In the 13 sessions, the Taiwan dollar fell about 1.5 percent against the greenback, the longest losing streak the currency has seen in five years.
The local currency fell NT$0.200 or 0.67 percent against the U.S. dollar on Dec. 19 alone, one day after the U.S. Federal Reserve announced it would scale back its monthly bond buying program starting with a US$10 billion cut in January.
The value of the Taiwan dollar was also pushed downward by intervention from the local central bank to keep the currency low at time when business leaders have been urging depreciation.
Lai Cheng-I (賴正鎰), chairman of the General Chamber of Commerce of the Republic of China, noted that exports are essential to Taiwan's economy as outbound sales make up more than 70 percent of the country's gross domestic product.
Lai said as long as the Taiwan dollar falls 2-3 percent against the U.S. dollar, Taiwan's global competitiveness can grow 3-5 percent to give a boost to the local economy. A drop in the local currency's value has been widely desired by the business sector, he added.
Chang Pen-tsao (張平沼), the chamber's former chairman, said the Taiwan dollar is expected to fall further to around NT$31, following regional counterparts such as the Japanese yen and South Korean won in the wake of the Fed's tapering of quantitative easing.
Lai suggested, however, that a value of around NT$30 to the U.S. dollar is a fair value for the Taiwan dollar, cautioning against letting it drop much further.
Lin Hui-ying (林慧瑛), head of the Association of Small & Medium Enterprises, agreed, saying that if the Taiwan dollar depreciates too much, local imports will face rising purchasing costs that would hurt the local economy.
Lin said she believes that the central bank will closely monitor the foreign exchange market to maintain the Taiwan dollar at a proper level against the U.S. dollar.