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Strategies & Market Trends : Asia Forum

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To: Paul Berliner who wrote (5461)	8/12/1998 2:17:00 PM
From: Robert Douglas	Read Replies (1) of 9980

Taiwan to devalue? Maybe so, but it would make little economic sense. The 4 reasons you give for devaluation are mostly political and maybe they will win the argument. The one economic reason you give, that it would increase exports, depends on the reactions of their trading partners. It is beginning to remind me of the description of Lake Woebegone, where all the children were above average. Since all countries cannot have lower currencies at the same time it becomes like the dog chasing its' tail. I think I am correct in stating that most politicians are beginning to see devaluation as a recipe for disaster and will only do so as a last resort. Does Taiwan NEED to devalue its' currency? I think the answer is clearly no. Taiwan has run a trade surplus for each of the last 10 years and has reserves amounting to almost $85 billion. Its' trade balance is only slightly negative and the economy is still growing. ml.com Since Taiwan imports many raw materials whose cost is dollar denominated it would not be the plus that you mention to their overall trade picture. Will Taiwan devalue? I can't say. Should they devalue? Absolutely not. -Robert

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