The New Taiwan dollar pared losses on speculation exporters bought the currency with their overseas dollar earnings after it fell to the lowest since April 28.
Foreign investors' purchases of local stocks also lent support to the currency, said Lo Chung, assistant treasury manager at Chinese Bank (中華銀行) in Taipei.
"Exporters may have bought the local dollar when it fell beyond NT$31.40 against its US counterpart," said Lo. "Foreign buying of the stocks also provided some support to the Taiwan dollar. These would limit the declines in the Taiwan dollar."
The NT dollar dropped NT$0.011 to close at NT$31.383 against its US counterpart on the Taipei foreign exchange market. The currency may trade between NT$31.30 and NT$31.50 this week, Lo said.
Oversea investors were net buyers of the nation's stocks for a fifth straight day. Funds based outside of Taiwan have bought a net US$2.33 billion so far this month after selling a net US$787.4 million in April, according to stock exchange figures.
The NT dollar earlier dropped on speculation a government report tomorrow will say the nation's economy expanded in the first three months of the year at the slowest pace since the second quarter of 2003.
"It may be harder to aggressively buy the Taiwan dollar when the report may show slower growth," said Sadaaki Kondou, assistant general manager of the treasury department in Taipei at Mizuho Corporate Bank Ltd, a unit of Japan's biggest lender.
The currency may fall to NT$31.50 this week, Kondou said.
The economy probably grew 3.2 percent from a year earlier in the January-to-March period, according to the median of eight economists' forecasts in a Bloomberg News survey.
The government on Feb. 24 lowered its growth forecast for this year to 4.2 percent from 4.6 percent, citing sluggish exports, which account for almost half of the nation's US$305 billion economy.
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