The Taiwan dollar has fallen with the US set to apply the currency manipulator label
The Taiwan dollar has fallen sharply as the US calls the Asian country a currency manipulator, despite strengthening two ties in the face of an increasingly aggressive China.
The administration of U.S. President Joe Biden is expected to enter Taiwan in the middle of the year list of names and embarrassment because this month the Department of the Treasury meets three criteria used to assess whether a country is declining its currency. Yang Chin-long, the governor of Taiwan’s central bank, acknowledged that it was “possible” for Washington to call the nation a manipulator.
Analysts warned that the tariffs imposed on Taiwan’s exports as a result of the designation could damage a significant relationship in the region. Biden has searched strengthen diplomatic ties then recent incursions The Chinese military has entered Taiwan’s airspace and the global shortage of chips has boosted confidence in U.S. companies in technology groups such as the Taiwan Semiconductor Manufacturing Company.
“Bada [the US] we want to reduce our trade surplus with them, then we can stop selling our chips, “Yang joked in a hearing with lawmakers in Taipei.” But they need them. “
Taiwan’s currency fell more than 2 percent from its peak in early March to the U.S. $ 28.5, after remaining stable at about $ 28 per quarter in the first quarter.
In addition to concerns that the U.S. may designate the country as a currency manipulator, the fall of the Taiwan dollar has also added to the change in global markets.
Upwards U.S. Treasury yields Taiwan’s debt has become quite attractive to global investors, while far from growth like technological growth, it has led to the sale of shares of Taipei-listed semiconductor shares. These factors have exceeded the demand for assets denominated in Taiwan dollars.
Expectations that the Biden administration will direct to Taiwan have risen following the appointment of economist Brad Setser to the Office of the U.S. Trade Representative in February. Setser cited a critical report on currency hedging tactics used by Taiwan’s central bank when the Treasury put the country on its list last year.
Analysts pointed to Taiwan’s dollar trading patterns in January and February, believing the central bank had indicated attempts to limit currency appreciation to support the major export industry.
During the period, the Taiwanese currency was frequently strengthened against the dollar earlier in the day, before weakening again in the last hour of trading. Chinese chief economist Iris Pang of ING said he suggested the involvement of central banks. “It simply came to our notice then. . . A very strange operation was taking place in the Taiwan dollar Forex market, ”he added.
A book by current and former central bank officials said politicians ’resistance to a stronger currency has hurt Taiwan, prompting many exporters to focus on products that are cheaper than innovative products.
The Taiwanese central bank declined to comment on the country’s exchange rate policy.
Although the US marks Taiwan as a currency manipulator, some analysts believe that Washington is unlikely to continue with tariffs given the delicate nature of the region’s geopolitics.
“It’s not just about Taiwan’s economy, it’s politics,” ING’s Pang said.