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Economic Daily News: Currency, stock market face challenges

Economic Daily News: Currency, stock market face challenges

Since the United States launched the third round of quantitative easing in mid-September, Taiwan's currency and its stock market have trended in two different directions. Due to an influx of hot money and the appreciation of the Chinese yuan, the Taiwan dollar has risen to near NT$29 against the U.S. dollar. Taiwan's stock index, on the other hand, has plunged more than 8 percent this month following a brief upward reversal. QE3 has obviously driven hot money back to emerging markets, with all Asian currencies facing increased pressure to appreciate. Under these circumstances, the Taiwan dollar is likely to continue to rise in the coming year toward NT$28 against the U.S. dollar. Exporters must take the proper steps to mitigate foreign exchange risk. Meanwhile, with the economic situation in the United States and Europe showing no improvement, QE3 has had only a limited effect on global stock markets, including Taiwan's. In Taiwan's market, however, turnover has shrunk significantly due to the imposition of a capital gains tax on stock transactions and a string of policy mistakes made by the government in recent months. This has seriously dampened investor confidence, which in turn deepened the downward spiral of Taiwan's stock market. In order to increase stock market momentum, Premier Sean Chen needs to overcome the bottlenecks facing his Cabinet to boost investors' confidence. (Editorial abstract -- Oct. 30, 2012) (By Y.F. Low)


Updated : 2021-03-03 16:41 GMT+08:00