Taiwan central bank Governor Perng Fai-nan said the local dollar is “very stable” versus the currencies of export rivals and sustained intervention to limit gains has not been needed in the 15 years since he took office.
A drop in the Japanese yen, which is sliding for a sixth month against the U.S. dollar, has limited impact on Taiwan as the two economies’ exporters don’t compete directly in overseas markets, Perng said today in response to questions from lawmakers. The monetary authority will step in to the currency market to maintain order when volatility is excessive, he said.
The Taiwan dollar has lost 2.4 percent this year against the greenback as the yen’s decline to the weakest since August 2009 fanned concern the island’s central bank will influence the exchange rate to protect exporters. The yen dropped 9.1 percent since Dec. 31 and South Korea’s won fell 4.5 percent.
Taiwan’s central bank has sold the local currency to counter appreciation in the runup to the market close on most days in the past year, according to traders who asked not to be identified. Perng was appointed governor in February 1998 and the island’s currency strengthened 7.9 percent since then. South Korea’s won jumped 47 percent and the yen climbed 33 percent.
The Taiwan dollar was little changed today at NT$29.745 against its U.S. counterpart as of 12:38 p.m. in Taipei, based on prices from Taipei Forex Inc. It touched NT$29.825 earlier, the weakest level since Sept. 10.
The island’s biggest manufacturers, including Taiwan Semiconductor Manufacturing Co. and HTC Corp. compete with South Korea’s Samsung Electronics Co. for export orders. Korean Finance Minister Bahk Jae Wan said Jan. 23 the government was “all ready” to intervene and smooth won volatility as the yen slides. Korean automakers and shipbuilders compete globally against Japanese companies including Toyota Motor Corp. and Mitsubishi Heavy Industries Ltd.
Taiwan’s exports fell 16 percent in February, double the drop forecast by economists in a Bloomberg survey, as shipments to China and the U.S. declined. The central bank, which held the benchmark rate at 1.875 percent for a sixth time in December, is due to review borrowing costs on March 28.
Perng, who was re-appointed to a fourth term, said today he expects Bank of Taiwan, the island’s largest by assets, will begin handling Taiwan dollar transactions in China after being named as the clearing bank in December.
The monetary authority will consider adding Chinese sovereign bonds to its foreign-exchange reserves after signing a currency-swap agreement with the People’s Bank of China, he said. The island’s reserves stood at $404 billion on Feb. 28, ranking them third-highest in Asia, behind China and Japan.