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Central Bank of China intervenes with exchange rate?

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The New Taiwan (NT) dollar has been on the rise since the Lunar Chinese New Year. After a steady opening on Thursday, it went up another 14 cents versus the U.S. dollar. But around noon, the government-owned Central Bank of China decided to intervene, forcing the nation’s currency to fall by 1 cent. It eventually closed at NT$30.82 to one U.S. dollar. As the NT dollar continues to rise, many of the nation’s exporters are asking the government to intervene in reaction to this wave of currency fluctuation. As a result of an influx of international investments, the NT dollar has been on a steady rise since the Lunar Chinese New Year. The highest-ever NT dollar to U.S. dollar exchange rate was recorded when it reached NT$30.67 per U.S. dollar. The Central Bank of China has been hesitating to intervene in reaction to this wave of fluctuation. Business owners and politicians each have differing points of view when it comes to the matter of government intervention. “Many in the business community have been complaining about the losses they have incurred during this recent wave of currency fluctuation, and most of them are in the real estate, technology and garment sectors,” said Chinese National Federation of Industries Chairman Ho Jen-shyong. “No! If the central bank intervenes in the currency market, the people of Taiwan will end up suffering as a consequence. We will definitely see inflation and our citizens will suffer,” said PFP legislator Christina Lu. “Our concern is that the large investments may be having a destabilizing effect on the economy. But we shouldn’t have to worry, because the market is big enough to handle it. The quantity of goods flowing through this market is large enough,” said one executive from PNP Paribas Pereqrine. “We cannot allow such large investments to flow in and out of our market in this way. Otherwise, a lot of people may suffer as a result,” said PFP legislator Joana Lai. Ever since the Lunar Chinese New Year, the value of the NT dollar has risen more than one whole NT dollar against the U.S. dollar, a development that is seen as being beneficial for those studying aboard and for domestic importers. However, the prices of goods may undergo inflation, thus decreasing the nation’s foreign exchange reserves at the same time. Each percentage point of fluctuation will have a long-term effect on the economy and on people’s daily lives.