NT dollar rises in step with TAIEX index

This article was written by Bowun Jhu and published by the Taiwan Journal on January 20, 2006. It reports that the New Taiwan (NT) dollar appreciated on massive trading volume on January 5, closing at NT$32.016 against the U.S. dollar, up from NT$33.493 a month ago. Daily trading volume on the local foreign exchange market also leapt significantly.

Taiwan's Central Bank of China had stepped into the market aggressively in order to moderate this trend. The bank's policy is to slow down, rather than to stop, the appreciation of the NT dollar. It is expected that the rising NT dollar will have a negative impact on Taiwan's exports. Many industrial associations in Taiwan, including the textile makers and the electrical and electronic manufacturers, have already issued their warnings in this regard.

The Taiwan Stock Exchange (TAIEX) also reached its highest mark in 20 months on January 3, after suffering a big drop on the previous day. The January 2 drop was largely due to President Chen Shui-bian's announcement that the government will implement a "proactive management, effective liberalization" approach to dealing with Taiwan-China economic issues. The announcement was interpreted as the government's attempt to tighten regulations over China-related business, and caused all China-themed stocks to plummet.

The TAIEX index rose again after the government clarified the president's announcement by saying that it will not drastically change Taiwan's economic policies toward China or push for independence in a new constitution.