| dc.description.abstract | Taiwan is a small and highly-open country. Foreign trade is the lifeline of Taiwan’s economic development. Since 2004, the total volume of the exports and imports trade has been greater than the gross domestic product (GDP) of Taiwan. With the pace of economic liberalization and internationalization, exchange rate changes have enormous influence on the firms in Taiwan, where there is high trade dependence. In the face of a complex international environment and foreign exchange rate exposure circumstances, how Taiwan’s enterprises survive in such a changeable environment turns to be an important issue. This article is about to probe into, from the economic to
the non-economic aspects, some basic factors affecting NT exchange rate. Meanwhile, in terms of such various economic factors as the balance of payments, price index
(CPI), the interest rate (RD), economic growth, foreign reserves, etc., this article presents the empirical research of exploring the relation between these mentioned
economic factors and NT exchange rate to USD. It also tries to provide enterprises with some data to grasp the trend of exchange rate changes, so as to hedge with
adequately-managed strategies against foreign exchange risks that might cause lower profit because of loss on exchange. Furthermore, the empirical evidence of this
investigation shows that under the circumstances of the net increase in Taiwan’’s international balance of payments, that Taiwan’s interest rates are higher than U.S.’s, that Taiwan’’s economic growth rates are higher than U.S.’s, and that Taiwan’’s foreign exchange reserves increase, the appreciation of NT Dollar will be promoted. However, if Taiwan Consumer Price Index is higher than the U.S.’s, it will make NT dollar depreciate. Both these results are consistent with economic theories. The article, for the sake of offering various options to enterprises, also comes with the practical examples to indicate some of the most common strategies which utilize exchange rate derivatives for hedging.
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