Taiwan signaled it won’t push for a weaker currency even as slowing global growth puts pressure on policy makers to protect exports. The island’s dollar rose. The central bank “doesn’t favor Taiwan dollar depreciation,” Governor Perng Fai-nan said in reply to questions from lawmakers in Taipei today. Taiwan’s exchange rate is determined by market supply and demand, and the island is facing less “hot money” pressure, he said. Asian stocks have fallen in recent months as Europe’s debt crisis and a struggling U.S. economy dimmed the outlook for the region’s exporters. Taiwan’s central bank left its benchmark interest rate unchanged at 1.875 percent last week, ending five straight quarters of increases as regional policy makers seek to protect their economies from a faltering global recovery. Taiwan’s dollar gained, snapping a four-day loss, on speculation exporters took advantage of recent declines to repatriate earnings at a more favorable exchange rate. The currency rose 0.2 percent to NT$30.623 at 11:57 a.m. local time. Global growth is slowing and price gains are easing after peaking in the third quarter, Perng said today. Emerging markets can’t decouple from developed economies, he said. The Taiex stock index has tumbled 22 percent since April, as a global stocks rout wiped almost $10 trillion off shares worldwide in the third quarter. Foreign investors sold Taiwan stocks in September, leading to capital outflows and a decline in foreign-exchange reserves, Perng said today. Still, Taiwan’s banking system has “healthy” liquidity, he said. Taiwan hopes to sign a cross-strait yuan clearance agreement with China soon, Perng said, without giving further details. While the yuan will probably become a major international currency one day, the island won’t hold it in the foreign-exchange reserves for now as the mainland hasn’t opened its capital account, he said. China won’t have a “hard landing” as its economy is performing relatively well compared with the U.S. and Europe, Perng said. He said the island’s policy makers will closely monitor economic data from the mainland, its largest trading partner. To contact the reporter on this story: Chinmei Sung in Taipei at csung4@bloomberg.net To contact the editor responsible for this story: Stephanie Phang at sphang@bloomberg.net

Source