What's Happening?
The United States Department of the Treasury and the Taiwan central bank have reaffirmed their commitment to maintaining transparent exchange rate policies. This decision was made under the auspices of the American
Institute in Taiwan and the Taipei Economic and Cultural Representative Office in the United States. Both parties agreed to avoid manipulating exchange rates or the international monetary system to gain an unfair competitive advantage. They also concurred that macroprudential or capital flow measures will not target exchange rates for competitive purposes. Additionally, public investment vehicles such as pension funds will invest abroad for risk-adjusted returns and diversification, not to influence exchange rates. Any intervention in foreign exchange markets will be reserved for addressing excessive volatility and disorderly movements in exchange rates.
Why It's Important?
This agreement between the U.S. and Taiwan is significant as it underscores the importance of maintaining fair and transparent economic practices in international finance. By committing to avoid exchange rate manipulation, both countries aim to foster a stable economic environment that benefits global trade and investment. This move is likely to reassure investors and international partners about the integrity of their financial systems. It also highlights the role of transparent policies in preventing economic imbalances and promoting fair competition in the global market.
What's Next?
Both the U.S. Treasury and the Taiwan central bank have committed to ongoing consultations on macroeconomic and foreign exchange matters. They will continue to monitor exchange rate policies and practices, ensuring public disclosure and transparency. This ongoing dialogue is expected to strengthen economic ties between the two regions and contribute to a more stable international monetary system.
