TAIPEI (Reuters) – The Taiwan dollar’s exchange rate with the U.S. dollar has been stable this year without large fluctuations, Taiwan’s central bank said on Tuesday, adding it had intervened in the market this year but at a more modest rate than last year.
The strength of the currency has been a concern not only because it makes exports from the trade-dependent economy more dear but also because in December the U.S. Treasury added Taiwan to a “monitoring list” of countries whose currency practices have caused concern.
In a report to parliament ahead of governor Yang Chin-long taking questions from lawmakers on Thursday, the central bank said that in the first half of this year it bought a net $8.73 billion to intervene and “avoid serious disorder” in the currency market.
By comparison, the central bank purchased a net $39.1 billion for all of 2020.
It said the Taiwan dollar had so far appreciated around 2.8% since the end of last year which was “stable compared to other currencies’ exchange rates”.
Taiwan’s managed floating exchange rate system has served it well, with the currency fluctuating less than the Singapore dollar, Euro, Yen or South Korean Won, good both for Taiwan’s exporters, financial stability and economic growth, the bank added.
Taiwan is a small and open economy with a high reliance on trade, so it is necessary to maintain the currency’s “relative stability”, the bank said. Last week, the central bank revised up Taiwan’s economic growth outlook for the year.
(Reporting by Liang-sa Loh and Ben Blanchard; Editing by Simon Cameron-Moore)