After Falling 2 Percent In Two Days, Nt Dollar Appreciates Slightly

Published on Aug. 14, 2015

A currency war sparked by a sharp decline in the Chinese yuan caused the New Taiwan dollar to fall by more than 2 percent over the previous two days. Today, it bucked that trend by rising nearly a tenth of an NT against the US dollar. Retired NTU economics professor Kenneth Lin believes this is a sign that the central bank will not allow a long-term decline in the currency.After two days of declines, the NT dollar stopped its fall on Thursday. The currency was mired in its sharpest depreciation in close to four years, triggered by policy changes in China that devalued the yuan. This trend, seen across Asia, has been dubbed a new round of currency wars.Tsai Ming-changFinancial ExpertWith the yuan depreciating, our exports to China will earn less. To make up for this gap, we can depreciate our own currency.On Tuesday and Wednesday, the central bank of Taiwan let the Taiwan dollar fall by a little over seventh-tenths of an NT against the US dollar. There has even been talk that the currency could approach the NT$35 mark reached during the financial crisis.Kenneth LinEconomics ExpertThe depreciation of the NT dollar will probably be very short. It will be beneficial to exports, but over the long term, the disadvantages would likely outweigh the advantages. Based on past central bank policy, we would expect it to maintain a stable exchange rate.Kenneth Lin believes that the central bank has no interest in long-term depreciation. With the shock of the yuan’s slide over and the NT dollar rising slightly on Thursday, this round of depreciation in Taiwan could be at an end.