The Central Bank of Republic of China (Taiwan) kept its policy rate unchanged at 1.875% at its June quarterly board meeting, in line with our expectations and consensus. This is the 16th consecutive meeting at which the CBC has kept rates on hold - its longest streak of policy inaction. In view of the extended softness in exports, the bank pledged to smooth out exchange rate volatility, but reassured the market that export weakness was largely driven by price effects.
Governor Perng pointed out that despite recent TWD strength, the TWD NEER had fallen much more than the KRW - a perceived trade competitor - over time. This is seen as a sign that he remains relatively relaxed about the TWD on a relative basis, albeit assessing the fair value in a longer time frame, says Barclays.
