Taiwan is a small and open economy. International trade value
statistics are an important indicator of its domestic economic
development, and the NT dollar to US dollar exchange rate
strongly influences the Taiwanese economy. The exchange rate
has always been a central consideration for foreign and domestic
investors, and has become an important reference in determining
monetary policy.
Fig. 1 charts the NT dollar exchange rate against the US dollar
over the past ten years. August 2008 to March 2009, the effect of
deleveraging1 and the unwinding of carry trade2 caused rapid US
dollar appreciation. During the first half of 2011 the United States