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Chief Of Taiwan's Central Bank Faces A Currency Headache

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Chief Of Taiwan's Central Bank Faces A Currency Headache

Perng Fai-Nan started his tenure as Taiwan’s central bank chief by defending his currency when Asia faced a financial crisis. Nearly two decades later as he approaches retirement, the Taiwan currency will pose a challenge again.

Perng, who is turning 78, will soon quit after twenty full years in his post meaning that he will have served longer as the central bank chief compared to his predecessor Alan Greenspan. Perng thought of spending more of his 2016 working in order to maintain currency stability, other than the fine-tuning interest rates.

Rising global protectionism fears and currency volatility have brought uncertainty over the outlook for the economy that depends majorly on exports, posing a challenge for Perng, who has greatly taken care of stability as a priority. The Taiwan country, which counts the United States as a counterbalance to China and a key for the facto ally, is unlikely wanting to irk the U.S with its currency.

"The central bank will make sure it has handled the currency. Taiwan will be in big trouble if the U.S president is determined to involve it in the currency issue, "the chief economist of the Fubon Financial Holding Company, Rick Lo, said.

Willow Branch

Perng once had a comparison of the Taiwan dollar to a willow branch-bending, not breaking, other than hot money storms blowing in and out.

Perng advocates intervening in the local and international markets when the exchange rates change very rapidly. Taiwan, being the major supplier to the Chinese manufacturers, it has enjoyed trade surpluses years and has constructed reserves equal to almost 83% of economic output, making it have more firepower.

Taiwan’s use of the power has not gone unknown. The Obama administration consists Taiwan on its currency watchlist last year in October, putting it that it continually intervened to downgrade its value.

The usual stance of the central banks maintaining currency stability with a well-handled float regime so the exchange rate, "will not be volatile, nor stifflike wild horses," he said in his speech which was from a text put across by the monetary authority.

The Taiwan currency has enhanced volatility in the previous months. Donald Trump’s criticism and protectionist rhetoric of what he referred to as currency devaluation by the trading colleagues helped to fuel a 4% gain during this year, Asian second-strongest currency behind the Korean won. The same followed a drop of 2.4 percent from Trump’s last years’ election.

The currency recent gains have partly been strengthened by expectations and Taiwan would relax on intervention due to the fear of provoking the United States. The Taiwan’s central bank strengthening currency will be the largest challenge this year but reserves stockpile helps to keep it stable, Sinopac Financial Holdings Company chief economist, Jack Huang said.

Guiding Hand

Perng’s economic output has almost doubled in his 2 decades steering policy. The central bank’s policy board’s newest member, Hu Sheng-Cheng, compared Taiwan’s economy as a small sized boat on the ocean and saying that he helped it to sail through big storms of the capital flows.

"As a smaller economy, Taiwan needs a quick response and strict governor who is able to give orders," Hu, theChung-Hua Institution’s leader for Economic Research, said.

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