The New Taiwan Dollar exchange rate’s significant appreciation has sparked attention. The Ministry of Foreign Affairs of the Republic of China (Taiwan) stated that the tariff negotiations with the United States do not involve currency rate issues, and the Central Bank is not a part of these tariff negotiations.
The New Taiwan Dollar saw a two-day streak of strong appreciation, only to reverse and depreciate on the 6th. The Central Bank’s Foreign Exchange Department stated that the disorderly situation has come to an end, indicating that the market has returned to rationality.
In response to media inquiries about whether the Taiwan-US negotiations touched on currency rates, the Ministry of Foreign Affairs of the Republic of China clarified on the 6th, stating, “The Executive Yuan’s Office of Trade Negotiations made it clear to the public on the 5th that the current tariff negotiations with the United States do not involve discussions on currency rates. Additionally, the Central Bank of Taiwan is not engaged in the tariff negotiations and is not part of the Taiwan-US Economic and Trade Working Group.”
The Executive Yuan’s Office of Trade Negotiations issued a press release on the 5th indicating that the tariff negotiations did not delve into currency rate issues. Both the Taiwan-US Economic and Trade Working Group and the US Negotiating Team do not include the Central Bank. Furthermore, the Deputy Prime Minister of the Executive Yuan, Shen Lyu-Chen, who leads the US Negotiating Team, also does not include the Central Bank.
The Ministry of Foreign Affairs of the Republic of China also mentioned that according to reports from South Korean media, Bank of Korea Governor mentioned that market sentiment has caused fluctuations in the currency rates of some Asian countries, indicating that certain domestic reports have exaggerated the situation.
Lian Xianming, director of the Chung-Hua Institution for Economic Research, mentioned on Facebook that he asked a Korean-speaking colleague to find the original article. In line with the newspaper headlines, there were some discrepancies. The translated text from the colleague indicated that Bank of Korea Governor Lee Chang-kyung said, “The United States has not only discussed currency issues with our country but also with Japan, Taiwan, Malaysia, and other Asian countries. I believe that with the spread of these rumors, there are expectations in the market that something will happen…”
Lee Chang-kyung continued, stating, “Currently, it is unclear what demands the United States has regarding currency issues, how they will proceed next, what common demands they will make to Asian countries, or if they will make separate demands. The Ministry of Strategy and Finance is currently engaging in communication at the working level. Therefore, the situation should be clearer in a few weeks, but we do not yet fully understand the specific requirements from the United States.”
Lian Xianming expressed his inclination to believe that currency rates were not on the negotiation agenda in this tariff negotiation (though it does not mean they won’t be in the future). He provided five reasons for this analysis.
Firstly, the article mentioned, “I am not sure whether the United States really wants a strong dollar or a weak dollar.” If the US was pressuring for an appreciation, how could their intentions be uncertain?
Secondly, among neighboring Asian countries, only Taiwan appreciated rapidly and significantly. If the same kind of information reached other countries in Asia, it is challenging to imagine why only Taiwan needed to appreciate, and no reports emerged about Japan seeking appreciation.
Thirdly, if the US truly raised currency rates as a negotiation agenda and Taiwan agreed to appreciate, the Central Bank should have intervened decisively in the market, given that both sides understood each other, so there should be no concern about being seen as a currency manipulator by the US. Why did the Central Bank appear somewhat hesitant this time? It did not resemble the heroic actions of the Central Bank in the past.
Fourthly, Trump’s primary concern now should be whether implementing tariffs will lead to inflation. At this juncture, demanding Asian currencies to appreciate could cause import prices to rise, unnecessarily increasing the risk of inflation.
Fifthly, South Korea currently lacks leadership (as the acting president resigned, and the acting acting president also stepped down). There is no one to decide on how South Korea should negotiate tariffs. At this time, for a central bank governor to speak frankly, if it were to anger the US for retaliation, who would take responsibility?
Lian Xianming further explained that his argument was that currency rates were not on the negotiation agenda. The current issue is whether the government is succumbing to US pressure to appreciate. If a deal were struck, several countries should appreciate together (as unilateral appreciation of Taiwan alone cannot reduce trade imbalances). The Central Bank would then adjust the steps toward appreciation (during the Plaza Accord, the Central Bank gradually appreciated the currency every day, criticized for favoring export manufacturers). These aspects of appreciation were not observed this time, leading to the conclusion that currency rates were not part of the negotiation agenda.