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Institute cites positive impact in short term from US' QE3

The third round of quantitative easing measures (QE3) launched by the United States will create a positive impact in the short-term, said Liang Kuo-yuan, head of Polaris Research Institute, yesterday.

He said financial instability across the globe over the past few years was the result of various negative factors, including a raw material price increase, which has weakened a global economic recovery and has produced negative impact on the distribution of wealth, as those who can afford to invest in high-risk assets are not from the low and middle class.

He said the two currently existing quantitative easing measures, namely QE3 and the “outright monetary transactions” launched by the European Central Bank, have played an integral role in supporting the global economic and financial markets.

Liang also mentioned how QE3 is likely to affect Taiwan's economy.

“The island can respond to QE3 with no problem, providing the financial markets are relatively stable. One negative impact however is the appreciation of Asian currencies,” he said. “Taiwan should worry if its currency is rising faster than those of countries that we compete with, for example Korea.”

“A rise in raw material prices is also a concern, as it may result in inflation,” he said.

Separately, Hung Shou-chieh, vice president of Yuanta Polaris Futures, said based on what happened after the previous two QE measures, U.S. Treasurys are expected to see a price increase in the near term.

Once the market improves, hedging needs will decline, resulting in a price drop for U.S. bonds, he said.

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