The New Taiwan dollar weakened, snapping an 11-day rally, after a Chinese-language business daily reported the central bank may sell the currency to stem its gains.
The NT dollar fell NT$0.087 to close at NT$30.95 against its US counterpart in Taipei, reducing its gain for the week to 0.7 percent.
"The central bank has given a warning to the market," said William Chou, a foreign-exchange analyst at Hua Nan Commercial Bank (華南銀行). "With this atmosphere, nobody wants to push the Taiwan dollar higher. It's close to the red line for the central bank."
Banks may have their foreign-exchange licenses suspended or revoked if they help overseas currency traders speculate in the NT dollar, the paper said, without citing anyone. The local currency, which had the highest close on Thursday since July 12, 2000, has increased 2.6 percent against its US counterpart this year, to become the third best performer after the Sri Lankan rupee and South Korean won.
President Chen Shui-bian (陳水扁) said on Feb. 24 that he won't pursue independence in his last three years in office and will seek direct transport links with China.
"The political situation has improved and the outlook for some stocks is better, so a large inflow of capital may still come into Taiwan," said Tommy Ong, vice president of the treasury and markets at DBS Bank (Hong Kong) Ltd, a unit of Southeast Asia's biggest lender.
"That is supporting the Taiwan dollar," Ong said.
Global investors acquired a net US$691 million worth of Taiwanese equities this week, after buying US$3.7 billion of shares last month, according to Taiwan Stock Exchange figures.
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