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Overseas funds' inflows cause NT dollar to rise

"Global funds are coming into Asia and Taiwan is one of the top picks."

Benson Liu, a currency trader at International Bank of Taipei

The New Taiwan dollar rose to its highest close in more than four years on optimism overseas fund managers are bringing in money to buy the island's stocks on the view they are cheap versus regional rivals.

The currency last month strengthened 1.9 percent as investors abroad bought a net US$3.7 billion of Taiwan's shares, reversing net sales in January.

Purchases yesterday were the largest in a week, suggesting further gains in the currency when the transactions are settled within three business days.

"Global funds are coming into Asia and Taiwan is one of the top picks," said Benson Liu, a currency trader at International Bank of Taipei (台北商銀).

The NT dollar closed NT$0.056 up at NT$30.819 against its US counterpart, its strongest close since July 5, 2000, according to Taipei Forex Inc.

Funds abroad yesterday bought a net US$162 million of equities, the most since March 2, according to Taiwan Stock Exchange figures. They purchased a net US$20 million today.

Goldman Sachs Group Inc. raised its 2005 economic growth forecast for Taiwan, citing a more positive outlook for exports.

Goldman upgraded the projection to 4.5 percent from 4.2 percent, according to a report dated March 8.

Export orders, indicative of shipments in one to three months, rose 32 percent in January from a year ago to US$18.4 billion after climbing 26 percent in December, the Ministry of Economic Affairs said on Feb. 25.

The Taiwan currency's 3.4 percent rise in 2005 threatens to make the nation's exports less competitive than regional rivals.

Shipments abroad, which make up almost half the economy, are expected to rise at the slowest in almost two years in March, Hsu Kuo-chung (許國忠), finance ministry statistics chief, said on March 7.

Sales overseas this month will probably increase 5.9 percent from a year earlier, Hsu said.

The appreciation past NT$31 to the US dollar on March 2 suggests that the Taiwan currency is overvalued, a Chinese-language newspaper said today, citing an interview with Stephen Jen (任永力), head of currency research at Morgan Stanley in London.

Jen advised against selling the US currency, saying NT$31 is a reasonable level for the NT dollar, the newspaper reported.

While the nation's central bank is widely suspected to sell the currency to curb gains, the authority also may limit trading of foreign currency to stem the Taiwan dollar's appreciation, another Chinese-language business daily said yesterday, without saying where it obtained the information.

The authority may only sell the NT dollar to slow gains instead of reversing them, International Bank's Liu said.
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