Taiwan’s central bank on Friday defended the NT dollar value, dismissing claims it kept the currency undervalued to boost exports. The central bank responded to a recent report that claimed the NT dollar was 55 percent undervalued and created hidden economic risks
The bank said The Economist relied on the Big Mac Index, which it considers an unsuitable tool to measure currency value. The bank noted that even The Economist warned against using the index for valuation as early as 2003 and 2006.
Instead, the central bank highlighted the iPhone Index from Nomura Securities in 2016. The iPhone Index calculation showed that the NT dollar overvalued the US dollar by 17.1 percent, contradicting The Economist’s findings.
Officials explained that market supply and demand primarily determine the NT dollar value. Cross-border capital flows play a major role in setting currency levels. In 2024, fund flows of foreign and local capital were 19.3 times larger than commodity transaction values, demonstrating the market’s influence.
The bank also stressed that Purchasing Power Parity measures, often used to gauge consumer spending power, do not accurately determine currency value. Taiwan’s trade surplus with the US has not triggered requests from Washington to adjust the NT dollar.
Central bank officials confirmed that it occasionally intervenes to reduce market volatility and maintain orderly conditions. They also promised to continue transparent communication with the US Treasury on foreign exchange and economic matters.
Economists and market observers said the bank’s clarification strengthens confidence in Taiwan’s financial system. They emphasized that relying on market-driven mechanisms is essential for investor trust and economic stability.
Looking ahead, the NT dollar value will remain sensitive to global capital flows and economic developments. The central bank intends to maintain oversight while ensuring transparency and stability.
The repeated affirmation of NT dollar value underscores Taiwan’s commitment to free-market principles while addressing international scrutiny and public concerns.
