The NT dollar continues to strengthen against the U.S. dollar. Central Bank Governor Yang Chin-long recently said an exchange rate of NT$28 to US$1 will become the new norm in the short term. Meanwhile, the appreciation of the NT dollar is battering the export-oriented electronics industry.
The U.S.' quantitative easing and wild printing of money have resulted in hot money pouring into Asian currencies and pushed up the NT dollar exchange rate. On Oct. 27, the exchange rate at one time hit the "Perng Fai-nan Line" of NT$28.5 to US$1. It closed at NT$28.872, the highest point in the past nine years and two months. Central Bank Governor Yang Chin-lung recently said an exchange rate of NT$28 to US$1 will become the new norm, a prediction which has come true.
Taiwan is very clear that it may end up on the U.S.' list of currency manipulators unless it (the U.S.) changes its regulations. The Central Bank needs to be alert. As long as it remains alert, the NT dollar hovering around 28 will become the new norm.
On Oct. 28, the exchange rate continued ascending. It opened at 28.89, and exceeded 28.6 at one point to reach NT$28.587 to US$1, approaching the "Perng Fai-nan Line" of NT$28.5. Export-oriented industries are suffering from the strengthening of the currency. Metal casing supplier Catcher Technology's third quarter revenues were affected. It reported an exchange loss of NT$2.43 billion. This was coupled with the repatriation of overseas surpluses the previous quarter, which produced a one-time tax and resulted in a single quarter after-tax earnings of NT$569 million, a nearly 80 percent decline compared to the previous quarter and an over 80 percent decline year-on-year. The earnings per share fell from NT$3.63 to NT$0.75.
The third quarter financial report showed a one-off impact. The possibility of two consecutive quarters of significant appreciation is not that high, because the appreciation in the fourth quarter won't be as large as in the third quarter.
Analysts say the electronics industry is not the only one suffering exchange losses. The impact is also great on the machinery, machine tool, and life insurance industries. The U.S. dollar exchange rate is expected to continue changing until after the presidential election is over. Moreover, the U.S. Department of the Treasury has not yet released its latest list of currency manipulators, so the Central Bank may not be willing to rashly block the ascension. The "Perng Fai-nan Line" may be reached in the short term.