Taiwan’s Central Bank rejects claims of forex intervention

Taipei, Jan. 31 (CNA) The Central Bank on Sunday clarified that Taiwan’s inclusion by the United States in its currency manipulators watchlist last December was not because of foreign exchange market intervention as claimed in some media reports.

In a press statement posted on its website, the Central Bank said Taiwan was placed on the U.S. Treasury monitoring list because of its trade surplus with the U.S. and the level of its current account surplus, two of the three criteria used by Washington to label an economy a manipulator.

“It apparently has nothing do with the Bank’s intervention in the forex market,” the statement stressed.

The U.S. Treasury report did not contain statements that asked Taiwan to allow its currency to appreciate further, the statement added.

The Central Bank statement came in response to a local news report published on Saturday, citing a Bloomberg story.

The local report, written in Chinese, said the continued appreciation of the New Taiwan dollar had prompted the Central Bank to take action to stabilize the market, resulting in the U.S. placing Taiwan back onto its watchlist.

It further said the U.S. urged Taiwan to allow its currency to appreciate.

According to the U.S. Treasury, an economy can be identified as a currency manipulator if it has a bilateral trade surplus with the U.S. of at least US$20 billion, a current account surplus in excess of two percent of its gross domestic product (GDP) and has engaged in currency intervention exceeding 2 percent of its GDP.

Taiwan’s bilateral trade surplus with the U.S. over the four quarters through June 2020 rose from US$18 billion to US$25 billion year-on-year and Taiwan’s current account surplus reached 10.9 percent of GDP over the same period, the U.S. Treasury report said in its report.

The Central Bank explained in Sunday’s statement that the U.S. trade deficit with Taiwan widened because of its increasing demand for Taiwan’s information, communication, and audio-video products.

The greater demand is a result of the ongoing U.S.-China trade disputes, which diverted U.S. orders from China to Taiwan, the strict requirements on information security in the U.S., and the COVID-19 pandemic, which fueled the “stay-at-home” economy, the statement said.