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Cautious buying causes NT dollar's slide

The New Taiwan dollar fell against its US counterpart yesterday as investors turned cautious on a weakening Japanese yen and concerns over the central bank's approach of keeping the local currency stable, dealers said yesterday.

"Investors are displaying a more guarded attitude about dumping the US dollar after the Japanese yen fell back from its month-long high," a dealer at a local commercial bank said under the condition of anonymity.

But, he said the fall could be short-lived amid persistent inflow of overseas funds in response to Morgan Stanley Capital International (MSCI) Inc’s plan to hike the Taiwan’s stock market's weighing in May.

To the surprise of most dealers, the yen yesterday fell to 104.6 against the greenback despite a growing US trade deficit and a better economic outlook for Japan this year.

Taiwanese currency lost NT$0.012 to NT$30.832 against the greenback, retreating from the earlier gain of NT$0.01 in the morning session, according to the Taipei Foreign Exchange Inc.

Turnover increased slightly to around US$723 million, compared to US$621 million last Friday.

"The central bank's attitude also plays a crucial role in determining the NT dollar's trend," the dealer said, adding that the monetary authority's aggressive intervention would continue to influence the local foreign exchange market.

Aside from those factors, the dealer also blamed foreign investors’ sell of local stocks behind weakening NT dollar.

Overseas fund managers sold a net of NT$2.4 billion worth of local stocks yesterday, reversing massive purchase in the past months of the year.

But, the NT dollar’s fall could be temporary. The NT dollar would continue to spiral up against the US currency at a slower pace, another dealer said.

“The NT dollar’s firm would not change in the short term, but it would need a renewed boost for a big jump,” he said.

He expected the Taiwanese currency to seesaw at the range of NT$30.6 and NT$30.95 versus the US dollar in the following trading sessions.

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