The NT dollar had its lowest close in almost four months as stocks slumped after China warned President Chen Shui-bian (陳水扁) to accept Chinese sovereignty or "face destruction."
China's statement "has a big adverse impact on the NT dollar and Taiwanese stocks as it heightens the perception of political risk here," said Joseph Lee, a currency trader at Cathay United Bank (
The NT dollar fell 0.1 percent to NT$33.686 on the Taipei forex exchange market.
It was the lowest close since Jan. 20. The TAIEX dropped 5.1 percent to a nine-month low at 5,482.96.
The central bank may have bought its currency to stem the slide, said traders such as Pory Shih at Chang Hwa Commercial Bank (
"The central bank appeared to be in the market both late morning and toward the afternoon close," Shih said.
It probably sold about US$100 million and used the proceeds to buy NT dollars, he said.
The office of central bank Governor Perng Fai-nan (
A rising yen also helped stem the decline, said traders such as Chung Lo at Chinese Bank (中華銀行).
A gaining yen raises the cost of Japanese goods for consumers abroad, boosting demand for rival products from Taiwan and helping to push the nation's currency higher.
"The NT dollar fell after the stock market slid, but trimmed losses after the yen rose" against the US currency, Lo said.
Money managers abroad this month sold a net NT$57 billion (US$1.7 billion) of shares in the country.
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