Mon, Oct 04, 2004 - Page 10 News List

NT dollar to strengthen

GREAT EXPECTATIONS Foreign exchange experts predict that the local currency will rise against the greenback, depending on a sustained shares rally

CNA AND BLOOMBERG , TAIPEI

The New Taiwan dollar is expected to gain in value against the US dollar this week if the domestic stock market continues to rise in the coming days, foreign exchange analysts said yesterday.

Boosted by a strong Japanese yen and a stock market rally on Friday, the NT dollar ended at NT$33.940 against its US counterpart on the Taipei foreign exchange market.

The local currency also had a winning week after the nation's Central Bank of China lifted the rate it charges on 10-day loans to commercial banks by a quarter percentage point to 1.625 percent. The increase was twice as much as economists expected.

"There's a tendency for the Taiwan dollar to strengthen as the US interest-rate premium has narrowed,'' said William Chou, currency analyst in Taipei at Hua Nan Commercial Bank (華南銀行).

The US Federal Reserve has raised its benchmark lending rate between banks three times this year, to 1.75 percent. The NT dollar appreciated by NT$0.041 against the greenback over the past week but fell 0.7 percent in the past three months.

Market analysts predicted that the local currency will hover between NT$33.85 and NT$33.95 against the greenback during this week should the domestic bourse maintain its rising streak and the Japanese yen remain stable.

Taiwan Institute of Economic Research President Wu Rong-i (吳榮義) forecast over the weekend that the central bank is very likely to allow the local currency to gradually appreciate in the months ahead to curb looming inflation.

Wu said that the time is ripe for the central bank to do so, as local commodity prices have been adjusted upward various times this year as a result of rising international oil prices since late last year.

The international price of oil has remained at the historic high of more than US$50 a barrel in recent days.

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