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Taiwan dollar competitive edge over South Korean won narrowing

Taiwan dollar competitive edge over South Korean won narrowing

Taipei, Sept. 16 (CNA) The competitive edge held by the Taiwan dollar over the South Korean won is showing signs of narrowing, according to data released by the Bank for International Settlements (BIS) Thursday. The BIS' real effective exchange rate (REER) data showed that while the Taiwan dollar's REER remained below that of the won in August, the gap has been shrinking. The real effective exchange rate (REER) is the weighted average used to describe the strength of a currency relative to a basket of other currencies after inflationary adjustments. In August, the Taiwan dollar's REER stood at 103.95, down from 105.53 in July, as the local central bank continued its efforts to keep the currency cheaper so as to protect Taiwan's exports, which have been on the decline amid falling global demand. In addition, foreign investors recorded a net fund outflow of more than US$3.4 billion in August, which helped to send the local currency lower. It was the second consecutive month that the REER of the Taiwan dollar dropped, the BIS data indicated. Meanwhile, the won's REER fell to 109.01 from 110.63 in July. The difference between the REER of the Taiwan dollar and the won was 5.06 in August, compared with 5.1 in July, the BIS data showed. While the Taiwan currency fell 3.56 percent against the U.S. dollar in August, largely due to the central bank's efforts, the won dropped 2.06 percent against the greenback. Since July 2013, the Taiwan dollar's REER has been lower than the won's, but that competitive advantage has been fading since the Bank of Korea's aggressive intervention to keep its currency low and thus boost South Korea's exports. Before inflationary adjustments, the Taiwan dollar's nominal effective exchange rate (NEER) stood at 109.54, while the won's was 110.82, according to the BIS. (By Tsai Yi-chu and Frances Huang)


Updated : 2021-09-26 15:29 GMT+08:00