Mon, Feb 14, 2005 - Page 10 News List

Traders say local currency will rise against US dollar

STAFF WRITER , WITH BLOOMBERG

The local currency is expected to continue to rise against the US dollar after the Lunar New Year holiday, according to currency traders.

The New Taiwan dollar, which traded at NT$31.623 against the greenback on Feb. 5, prior to the Lunar New Year holiday, is expected to reach NT$31.5 over the short-term, as market participants speculate overseas investors will buy more Taiwan stocks, which will help the NT dollar.

Taiwan's financial markets were closed last week for the Lunar New Year. The market reopens today.

10.5 Percent Rise

The NT dollar has appreciated against its US counterpart by more than 6 percent over the past year and has gained about 10.5 percent since the start of 2002.

State Street Corp recommended that investors bet on gains in the NT dollar, saying money flowing into Asian stocks will benefit the currency.

Currency "flows, like equities, are Asia-centric," Carlin Doyle, an analyst with State Street in London, wrote in a research note dated last Wednesday.

"In recognition of strong Asian currency and equity flows, we initiate an overweight position in the TWD," or the NT dollar, the note said.

In the five days through Feb. 2, equity flows into Taiwan were greater than in 87 percent of the five-day periods for the past 10 years, State Street data show, according to Brian Garvey, senior currency strategist with the firm in Boston. State Street's headquarters are in Boston.

TAIEX up

The benchmark TAIEX closed at 6,034.60 points ahead of the Lunar New Year. The index rose 4.2 percent last year, after a 32 percent gain in 2003.

Currency traders also said the NT dollar may gain additional strength partly due to China's pledge in the Group of Seven finance ministers meeting earlier last week to eventually let the yuan trade freely against the US dollar.

While Beijing didn't specify when and how it would allow its currency to trade against the US dollar, market participants said they expect more speculative funds to flow into Asian currency markets.

Since 1994, the Chinese yuan has been fixed at around US$8.28 under the country's pegged exchange-rate system.

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