Taipei, Jan. 28 (CNA) The Taiwan dollar has come under strong pressure to depreciate amid a depreciation war among Asian currencies that was sparked by Japan's move to drive down the value of the yen, analysts said Monday. The Taiwan dollar finished at 29.56 against the U.S. dollar earlier in the day in the local foreign exchange market, the lowest level since Sept. 13. 2012. It dropped by NT$0.31, which marked the largest decrease since Sept. 23, 2011. Due to continued outflows of foreign capital from Asian markets, regional currencies, such as the Chinese yuan, South Korean won and the Singapore dollar all weakened noticeably Monday, with the won dropping the most by 1.74 percent. The Taiwan dollar weakened by 1.05 percent and the Singapore dollar by 0.73 percent. Japan's yen fell by 0.18 percent, while the Chinese yuan depreciated by 0.04 percent. Market dealers said the local currency will face growing pressure to devalue if the Japanese government led by Prime Minister Shinzo Abe continues to drive down the value of the yen as part of its open- ended monetary easing policy. Although some are concerned about the adverse impact of a weakening local currency on the domestic economy over the long term, the export- oriented high-tech sector is enthusiastic about the trend. Both Taiwan Semiconductor Manufacturing Company and the United Microelectronics Corporation, two leading-edge companies in the IC sector, said it will benefit them significantly if the local currency continues its depreciation course. Rock Hsu, chairman of the Taipei-based Chinese National Federation of Industries, contended that amid a depreciation war in the region, the value of the Taiwan dollar should be maintained at a range between 29-31 against the greenback in order to protect Taiwan's export competitiveness. "Exports are the lifeline of Taiwan's economy," he stressed, noting that 51 percent of the country's total outbound shipments last year in the amount of NT$301.1 billion (US$10.2 billion) was generated by the electronics and the electrical engineering sector. "The valuation of the Taiwan dollar has a very profound leverage on the country's competitive edge," he added. "If Taiwan does not respond to the currency depreciation efforts by Japan and South Korea, it would be driven into a corner." However, he admitted that a weakening Taiwan dollar will bring about import-induced inflation and that the central bank should respond within a certain range to allow companies to hedge against the fluctuation of currency value. Taiwan's central bank, meanwhile, urged local importers to slash the price of their imported goods from Japan to reflect the yen's depreciation and to benefit local consumers.

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