NT dollar follows the yen's nosedive against greenback

The NT dollar fell NT$0.85 against the US dollar yesterday. It was the largest one-day drop since Sept. 11. The NT dollar closed at NT$34.58 to US$1 yesterday, in trade volume totaling US$450 million.

Market watchers said the decline was caused by the depreciation of Japanese yen. They also said the NT dollar could soon test NT$35.

"If the yen keeps falling, the NT dollar is likely to follow. If the yen drops below ?130 against the greenback, the NT dollar is going to test NT$35," said Lee Tong-how (李桐豪), a finance professor at National Chengchi University.

The local currency tends to follow movement of the yen because of close trade and economic ties between Taiwan and Japan.

Central bank Governor Perng Fai-nan (彭淮南) said yesterday that the currency was "stable."

"The decline reflects foreign fund outflows. The central bank will maintain a managed floating rate." Taiwan's currency weakened to NT$34.580 from NT$34.495 Friday, leaving it down 4.3 percent this year.

Perng said that the recent volatility in the NT dollar was caused by the rise in remittances by foreign investors.