What’s happening with the currency exchange? Can someone who understands these things give me a simple and brief explanation? Our savings, (which are in a UK Citibank account in GBP) have devalued 10% in terms of NT$ since we arrived 6 months ago. The last time the NT$ gained so much against the pound, it was because of the banking system crash, but this time I can’t see why so easily. Any ideas?
Probably because the value of the NT is hinged on the US dollar rather than the pound.
My local currency halved against the NT in the five years I spent in Taiwan as the New Zealand dollar became stronger against the US.
The NT has gained nothing in terms of real value. It has depreciated as it always is depreciating due to constant and irreversible inflation.
The pound however has devalued even more than the NT making the exchange rate less favourable for the pound.
Mmm, yes, I can see that much for myself! 
Any ideas why though?
Well look at the other threads in business and money about euro and pound. The pound is devaluing due to economic conditions in the UK, too much govt. debt and there is an election coming up so things are uncertain. The NTD is fairly tightly linked to the USD, as the USD gets stronger the NTD gets relatively stronger than Euro/Pound.
If you are worried about your savings you can keep them there long term or else change half into Renminbi, probably a good bet.
There have been cracks starting to show all around Europe, so confidence is down. Not strength in the NT at all; weakness in the Euro and the Pound.
Well the NTD is one of the worlds strong currencies in actuality (although constantly undervalued similar to the Won or Yuan), showing very little fluctuation year to year, plus the Taiwan govt. has large cash reserves and Taiwan has a very strong export economy.
Undervalued against what?
Little fluctuation against what?
What do you see Taiwan exporting? Do you see this getting stronger or being in decline?
Put simply the US$ and some other major currencies (eg pound and Euro) are in trouble and hence anything that is not strongly linked to one of them will look as though it is appreciating in value. You should also see house prices increasing around Asia as the dollar drops - prices become more affordable in international terms and rental yields get higher, the reverse is true as the major currencies start to reverse the current situation.
IMHO the election is not a major issue in the UK as both parties have broadly similar policies and what is the worst case scenario - it stays as it is.
There was an article in a German financial newspaper citing some analysts that the Euro will continue to be “weak” during 2010/2011. According to them, the US Economy is currently growing faster right now than the overall Euro Economy. The euro was never strong, it was just the USD being weak.
They see the Euro between 1,20 and 1,30 to be “within normal”. $1.20 should be reached by 2011.
As the Euro is dropping right now it will affect the Euro Economy like doping. So exports will rise.
I think its a great time to invest in Europe now.
The pound has been dropping since a while now major reasons are speculations about high debt and a unsure election.
If you invest in a high fluctuating (but normally stable) home currency you need to do “averaging”.
Meaning invest a fixed amount in it every month. This method also has its critics but living abroad I don’t think we got much of a choice. See [wikipedia]Dollar cost averaging[/wikipedia] as example.
I plan to retire in France or Germany. I exchange Taiwan Dollars to Euros every month (put on a Euro account in Taiwan). And every 3-4 months I transfer a large sum of Euros to my bank account in Germany.
From there I use it for some stocks/capital life insurances/funds, fixed rate plans.
Always try to use a low/high currency as your advantage. For example go on vacation to Japan if the Yen is weak. Maybe this summer its a good opportunity to visit Paris. Comparing to last year its 20% cheaper.
PS. In Macroeconomics Western Europe is just great. Selling the own products expensive and buying cheap from others. What more can you want? 
[quote=“headhonchoII”]
If you are worried about your savings you can keep them there long term or else change half into Renminbi, probably a good bet.[/quote]
Why Renminbi? Sorry, I really don’t know anything about economics! :loco: (Although I do know you’re talking about mainland Chinese $$!! :bravo: )
Problem is, we’re living partly on those savings and partly on my scholarship. We’re OK until the next time fees are due, and hoping that the pound recovers a bit by then. It was almost NT$54:£1 last summer and now it’s down to NT$47.5:£1. :aiyo: Still, nothing we can do about it, except spend as little as we can without making life miserably tight. We can’t work on student visas and I hate teaching anyway!
[quote=“Bao_Lisha”]
Problem is, we’re living partly on those savings and partly on my scholarship. We’re OK until the next time fees are due, and hoping that the pound recovers a bit by then. It was almost NT$54:£1 last summer and now it’s down to NT$47.5:£1. :aiyo: Still, nothing we can do about it, except spend as little as we can without making life miserably tight. We can’t work on student visas and I hate teaching anyway![/quote]
You need to work on cutting down the fees and other costs.
Do you pay a lot for transfer fee’s or do you just withdraw with your U.K. ATM card?
I think the later is the cheapest way of getting funds to Taiwan at a good rate (depending on your card’s fees).
If you withdraw a lot of cash you can still put it on a bank here (in TWD).
There’s no way for you to apply for a credit in Taiwan, you could consider applying for a short term credit with your relatives help in the UK to get over this situation. On the long run you need to consider ways to balance the rates. It might be getting worse. Currency Cost Averaging is the only way to play this kind of game.
All that plus, at CHinese new year debts are traditionally cleared, creating a need for cash, whose purchase drives up the value of the NT.
Undervalued against what?
I mean undervalued as in the central bank refuses to increase against the USD (it went from 25NTD/USD 10+ years ago). This means Taiwanese wages haven’t risen in line with productivity and GDP gain but exports are very competitive.
Little fluctuation against what?
Against the USD…over the last 10 years.
Renminbi is expected to appreciate for a number of reasons (weakness in other currencies/political pressure from US/EU), very strong Chinese bank reserves, expanding stock market and economy is good for medium to long term growth.
The expanding stock market there is actually a bad thing if your target is to invest in RMB.
The stock market value there seems to face overvaluation. If there’s a correction it will not touch the RMB value much but it will surely affect the stocks strongly.
Money is only worth something if you spend it. The reserves they own is just debt of others.
Its not a free currency that has an offshore market, it is technically not possible to buy RMB outside China.
Maybe its possible to open a deposit account at one of the Bank of China overseas offices.
Otherwise if you really want to invest in RMB, open a deposit account in Hongkong and put a few thousands RMB in it. Personally I don’t think the RMB is a good currency to invest but its probably a good way to diversify investments. If you are nuts, you can also go for the USD/RMB futures in Chicago. 
RMB deposit rates were cut last summer, they are now around 1% afaik.
If you look to invest in something that is almost 100% China take a look at Templeton China World (TCWAX) mutual fund and iShares FTSE/Xinhua China 25 (ETF).
Rather be a creditor than a debtor. They are in the strongest position going forward excepting their property boom, they couldn’t devalue their yuan anymore, it would kill their export markets (protectionist barriers would be raised immediately). Shanghai will soon become one of the world’s biggest stock markets drawing in more investments and the yuan is freely convertible in HK, Taiwan etc…no big deal to open an account there. Thanks for advice about funds…
Actually, as some of the posters have already alluded to, it is all about weakness in the UK pound. The NTD has actually been weak against the Canadian dollar in the last little while for example. The reasons have to do with massive government debt and are not short term in nature. Your best hope is that the Taiwanese government decides that it needs a weaker currency to compete in the export markets and takes steps to devalue the NTD.
Actually, I doubt they are concerned about protectionist barriers as China already devalues their currency significantly. The major barrier to further devaluations is inflation which is already starting to become a problem. You are right, the long term direction for the Chinese Yuan is up.
[quote=“engerim”][quote=“Bao_Lisha”]
Problem is, we’re living partly on those savings and partly on my scholarship. We’re OK until the next time fees are due, and hoping that the pound recovers a bit by then. It was almost NT$54:£1 last summer and now it’s down to NT$47.5:£1. :aiyo: Still, nothing we can do about it, except spend as little as we can without making life miserably tight. We can’t work on student visas and I hate teaching anyway![/quote]
You need to work on cutting down the fees and other costs.
Do you pay a lot for transfer fee’s or do you just withdraw with your U.K. ATM card?
I think the later is the cheapest way of getting funds to Taiwan at a good rate (depending on your card’s fees).
If you withdraw a lot of cash you can still put it on a bank here (in TWD).
There’s no way for you to apply for a credit in Taiwan, you could consider applying for a short term credit with your relatives help in the UK to get over this situation. On the long run you need to consider ways to balance the rates. It might be getting worse. Currency Cost Averaging is the only way to play this kind of game.[/quote]
Sorry, I wasn’t clear here. I meant tuition fees which I can’t influence the level of, nothing to do with banking. We’re with Citi which has no fees for overseas withdrawals or transfers between accounts of any type, at least none that affect us if they do exist. 
Our banking is just straight exchange rate stuff, no transaction fees.
Did you compare it to other banks spot rate?
All the other banks we looked into wanted all manner of monthly fees for letting us withdraw overseas and/or tranfer to local accounts. Citi was the best offer with no international withdrawal or transfer fees at all and they give us the exchange rate pretty much as is. I’ve no complaints whatsoever with them, I just wish the blinking rate would improve! That, however, is way beyond my control, but now I understand the reason better, it makes it easier to shrug shoulders and just get on with it. We’re not going to be left short - we came with twice as much as we needed, but it is a shame to see it losing NT$ value. Hopefully, it’ll at least stabilise soon.
Thanks for the info, people.