The New Taiwan dollar and other Asian currencies yesterday rose against the US dollar on speculation quickening economic growth will attract increased investment in regional stocks from overseas.
Asian currencies also benefited after Republican President George W. Bush won re-election, raising speculation record current-account and budget deficits may widen in his second term.
In the fiscal year ended Sept. 30, the deficit swelled to a record US$412.6 billion as war in Iraq and security costs contributed to the third annual shortfall under Bush.
"Dual deficits will continue to haunt the US dollar, whose future depreciation is inevitable in the long term," said Cheng Cheng-mount (鄭貞茂), vice president of Citibank Taiwan.
Cheng said that he sees little policy change from the re-elected Bush, which may provide less than a driving force to stimulate the superpower's distressed economy.
Cheng held a consistent view over a weakening US dollar, saying the greenback's recent fluctuations merely represent a psychological uplift. "In the short term, the general atmosphere is dollar bearish," he said.
On the Taipei foreign exchange market, the New Taiwan dollar traded NT$0.0142 up to close at NT$33.285, its largest advance since May 19 and the highest close since May 6.
Turnover was US$937 million, compared with US$517 million on Wednesday.
Fund managers abroad bought a net NT$12.4 billion (US$373 million) of Taiwan's shares on Wednesday, the most since Oct. 4, stock exchange figures show. They purchased a net NT$10.8 billion Thursday. Global investors were also net buyers of South Korean equities this week, compared with net sales last week.
"Economic data out of Asia continues to be strong, so that helps to keep investors in Asia," said Thio Chin Loo, a currency strategist at BNP Paribas in Singapore.
The NT dollar may strengthen to NT$33 by the end of the year, Thio said.
Traders such as Noriyoshi Tsunoda said some investors may also bet on Asian currencies amid speculation China's interest rate increase on Oct. 28 brought the country closer to changing its pegged exchange rate to allow the yuan to rise.
With the rate increase, "speculation of the yuan revaluation has increased and that is an underlying supportive factor for the other Asian currencies," said Tsunoda, assistant general manager of the treasury department in Taipei at Mizuho Corporate Bank Ltd., a unit of Japan's biggest lender.
The NT dollar may strengthen beyond NT$33 by the end of the year, Tsunoda said.
additional reporting by Joyce Huang