The NT dollar pared a drop on speculation the central bank bought currency after as many as 30,000 people protested over Saturday's election because of what the opposition said were irregularities with the way the poll was conducted.
The NT dollar weakened 0.1 percent to close at NT$33.285 against its US counterpart, after sliding as low as NT$33.353, according to the Taipei foreign exchange market.
"The island is in a situation where nothing is certain, so investors' first reaction is to buy US dollars,'' said Joseph Lee, a Taipei-based currency trader at Cathay United Bank (國泰銀行).
Trading volume exceeded US$1 billion in the first 45 minutes of trading, exceeding the daily average this year through yesterday of US$842 million.
By the close of trading, about US$2.793 billion changed hands, the biggest amount since Jan. 15, 1999, when Bloomberg data first tracked turnover.
The volume spurred speculation that the central bank may be defending the currency from weakening further.
Foreign exchange reserves, which the central bank can use to support its currency, rose to a record US$224.8 billion last month.
The central bank "can hold the NT dollar for as long as they want," said Erik Herzfeld, head of J.P. Morgan Chase and Co options dealing in Singapore.
Vice Premier Lin Hsin-i (
A spokesperson for central bank Governor Perng Fai-nan (
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