The yen chalked up heavy gains on Friday across the board, extending a week of gains on the back of heightened speculation about a possible revaluation of the Chinese yuan.
The US dollar and particularly the euro were sharply lower versus the Japanese and other Asian currencies, most of which which are seen as potential beneficiaries of any move by China to let its currency appreciate. The yen also benefited from a drop in crude price below US$50 per barrel in the New York afternoon.
The dollar fell to a five-and-a-half week low versus the yen, falling 1.1 percent from late Thursday. The euro plummeted to an 11-week low against the yen, dropping 1.3 percent over the session.
The dollar, which had fallen back earlier in the session, was actually higher versus the euro late in the New York afternoon. The huge drops in the euro-yen exchange rate aided the dollar against the single currency, as did rising US equities and longer-term Treasury yields.
In late New York trading, the dollar was at ¥104.79, from ¥105.98 late Thursday, while the euro fell to ¥134.89, from ¥136.73 late Thursday. The euro has now lost 4 percent versus the yen since Thursday of last week.
The euro was at US$1.2869 from US$1.2894. Versus the Swiss franc, the dollar was at SF1.1951 from SF1.1930, while the pound was at US$1.9074 from US$1.9064.
The talk about a yuan revaluation reached a fevered pitch in the Asian session. A front-page article in Friday's China Securities Journal, a state-owned financial daily, suggested the time was "ripe" for further currency reform, citing unnamed analysts.
However, it was a sudden dip in the dollar's value that spurred speculative activity. After trading in a tiny range of 8.2763 yuan to 8.2765 yuan for most of this year, the US dollar briefly tumbled to a low of 8.2700 against the yuan during the early afternoon in Shanghai's spot market on Friday -- roughly a three-year low.
Within minutes, a fresh wave of revaluation speculation surged around Asian markets. The dollar remained lower even though the dollar/yuan rate quickly bounced back to a normal level and China's central bank said it had no plan to announce any policy change.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
PRESSURE EXPECTED: The appreciation of the NT dollar reflected expectations that Washington would press Taiwan to boost its currency against the US dollar, dealers said Taiwan’s export-oriented semiconductor and auto part manufacturers are expecting their margins to be affected by large foreign exchange losses as the New Taiwan dollar continued to appreciate sharply against the US dollar yesterday. Among major semiconductor manufacturers, ASE Technology Holding Co (日月光), the world’s largest integrated circuit (IC) packaging and testing services provider, said that whenever the NT dollar rises NT$1 against the greenback, its gross margin is cut by about 1.5 percent. The NT dollar traded as strong as NT$29.59 per US dollar before trimming gains to close NT$0.919, or 2.96 percent, higher at NT$30.145 yesterday in Taipei trading
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