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TAIPEI -(Dow Jones)- Taiwan’s central bank said the New Taiwan dollar was not undervalued, in a rapid response to a speech given by U.S. Federal Reserve Chairman Ben Bernanke in Frankfurt Friday that showed the local currency’s real effective exchange rate (REER) dropped over the past year.

In a statement released on its website Friday night, the central bank said the Fed’s data was “inconsistent with the facts.”

Taiwan’s central bank took issue with the Fed’s calculation of the REER, which measures a country’s currency value relative to the value of other major currencies, saying that it calculated its REER had fallen 0.2% from September 2009 to September 2010, far less than the 2.8% drop tabulated by the Fed.

In the past month Taiwan has sought to control inflows of hot money amid fears the inflows will continue to drive up the Taiwan dollar and harm the country’s export-dependent economy.

Local currency traders widely report the central bank buys U.S. dollars late during local trading sessions to slow the Taiwan dollar’s rise. In 2010 the Taiwan dollar has risen 4%.

Regards,

Don