Taiwan regulator holds emergency meet as currency soars

TAIPEI, July 14 (Reuters) - Taiwan’s financial regulator held an emergency meeting last week with major banks to discuss the soaring Taiwan dollar due to concern from exporters and the highest levels of government, three sources with direct knowledge said.

The Taiwan dollar has strengthened 2.1% against the U.S. dollar this year, with the central bank intervening daily to try and prevent it rising further, according to bankers.

Jean Chiu, deputy head of the Financial Supervisory Commission, called the emergency meeting on Friday, the three sources told Reuters, speaking on condition of anonymity as they were not authorised to speak to the media.

The meeting was to discuss an “exchange rate risk mutual assistance mechanism” for small and medium sized companies’ exports, the sources said, demand for which has already been hard hit by the coronavirus pandemic.

The meeting was also held due to concerns about the strength of the Taiwan dollar at the highest levels of government, the sources said.

However, the meeting ended with no conclusion, as such a mechanism needs more research and the central bank already provides hedging tools for exporters, the sources added.

The central bank declined to comment. The financial regulator did not immediately respond to a request for comment.

A strong Taiwan dollar hurts the competitiveness of the island’s small and medium sized companies, which are a pillar of the export-reliant economy.

The central bank - popularly called “the big boss” by Taiwanese bankers - was intervening in the markets much more than many people imagined, a senior banker told Reuters.

“At a conservative estimate the big boss every day is buying several hundred batches,” the banker said, referring to a system where each batch is worth $1 million.

Taiwan faces a political risk too, not wanting to be named by the United States - the Chinese-claimed island’s most important supporter on the world stage - as a currency manipulator.

“The Taiwan dollar keeps appreciating, manufacturers keep howling about it, and then there’s the U.S. currency manipulation report which keeps being read,” another banker said.

Taiwan was last labelled a currency manipulator by the United States in December 1992 and was later put on the U.S. Treasury monitoring list in 2016 and 2017. (Reporting by Liang-sa Loh; Writing by Ben Blanchard; Editing by Michael Perry)