NT dollar has yet to see significant impact from QE3,says Taiwan central bank governor Bryan Chuang,Taipei;Jackie Chang,DIGITIMES[Friday 28 September 2012]When the US Federal Reserve unveiled the third round of quantitative easing(QE3),the markets in Taiwan expected an influx of hot money to send the NT dollar appreciating sharply.The NT dollar has appreciated against the greenabck,but the extent has been less significant than expected,according to Perng Fai-nan,governor of Taiwan's central bank.
Perng noted that during the previous round of quantitative easing,the amount of hot money rushing into Taiwan was equivalent to around NT$300 billion(US$10.23 billion),but this time,the net inflows have been around NT$150 billion.
In response to some legislators'questions about the central bank's motive in controlling the currency exchange rate,Perng said that the currency exchange rate is a price and the central bank can only follow the flow and would never control the rate to gain profits.
Studies show that in the past 14 years,the central bank's accumulated profits have reached NT$2.67 trillion.The profits from the central bank have accounted for more than 10%of the government's total annual incomes in recent years.Some government observers noted that It is unhealthy for the nation's budget to rely on incomes from the central bank.
The observers said that in the face of increasing financial pressure,the Taiwan government has used more than NT$1 trillion from the central bank's profits in recent years.Without the support from the central bank profits,Taiwan's government debts would have already exceeded the limit.
Research institutes noted that Taiwan's central bank mainly obtains profits from interests on its foreign reserves saved in other countries.In 2011,the central bank's incomes from interests came to NT$425.9 billion and after paying out interests to domestic financial institutions,the central bank still had net profits of NT$227.2 billion.All profits have been handed over to the national coffers.
However,if Taiwan's currency appreciates significantly,profits in terms of NT dollar will decrease significantly,said the observers.Therefore,it is crucial to keep a stable Taiwan dollar exchange rate.
As Taiwan and China have signed a currency clearing MOU,Perng noted that if a swap mechanism is set up,the central bank can include the Chinese yuan into its foreign reserve structure within one year.
