NT Dollar and Korean Won Rush to Devalue

Taipei, Sept. 15, 2011 (CENS)--To bolster their export competitiveness, central banks of South Korea and Taiwan appear to adopt a hands-off stance, allowing their currencies to engage in a competition of devaluation.

After two days of mid-Autumn festival holidays, Korean won devalued 2.75%n against U.S. dollar yesterday (Sept. 14) from the level last Friday. NT dollar also depreciated 0.47% yesterday, raising the accumulated scale of depreciation in the last three trading sessions to 1.36%.

The trend of devaluation for the two currencies has become increasingly evident. During the period from Sept. 2-Sept. 14, Korean won had devalued 4.04% against U.S. dollar and NT dollar had dropped 2.3%.

Korean won closed at US$1=1,107.8 won yesterday, breaking the psychological mark of 1,100, down from US$1=1,077.3 won on the previous trading session.

NT dollar slipped NT$0.138, closing at US$1=NT$29.625 yesterday, the lowest level since March 3.

The exchange rate of NT dollar lost NT$0.404 in the recent two sessions, approaching the mark of US$1=NT$29.7. In the short term, the stability of the exchange rate will hinge on whether the exchange rate of euro can return to the level of 1 euro=US$1.4, up from 1 euro=US$1.36 now.

The devaluation of Korean won and NT dollar is reminiscent of the situation during the global financial tsunami in 2008, when South Korea resorted to drastic devaluation of its currency to bolster its export competitiveness. Should the European debit crisis remain shaky, NT dollar's exchange rate may drop to the level of US$1=NT$30 by the end of September. The scenario will mirror the hands-off stance of the Central Bank of China, in an attempt to bolster export and economy.

Meanwhile, banking managers pointed out that foreign investors remitted large amount of funds out of the country recently. In the past two sessions, such outward remittance topped NT$70 billion.