The New Taiwan dollar may fall on a deadlock over a recount of Saturday's elections, said Steven Chang, vice president of global markets in Hong Kong at State Street Bank & Trust Co.
"The main concern is this is going to be dragged out for a long time, then the government cannot rule," said Chang, 40, whose company is a unit of the world's largest custodian of assets.
"I would be very careful to think this is a cheap level to go into the market with this kind of political situation," he said.
Some currency analysts, including James Malcolm and Yen Ping Ho at JP Morgan Chase & Co, have said the NT dollar will rise this year and its drop since the election gives investors a chance to buy.
The currency rose for the first day in four after the government used a NT$500 billion (US$15 billion) fund to boost stocks. It climbed as much as 0.3 percent before paring gains to close up 0.1 percent at NT$33.251 at 4pm, according to Taipei Forex Inc.
Chang said he will sell the currency at NT$33.25 and it may slide to NT$33.50 should international investors sell shares after the political turmoil.
The deadlock between the ruling and opposition parties may spur selling of Taiwanese stocks and the currency by fund managers whose investments are more than the benchmarks they use to judge performance, Chang said.
"A lot of investors are already overweight [on] the stock market," he said. "If they're already long, and the risks are there, they have to sell stocks. We're bearish on the Taiwan dollar because of the positioning of investor flows."
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