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NT dollar likely to continue dropping, analysts predict

The strong performance of the US dollar over the last week is expected to continue for a while longer, so the New Taiwan dollar is likely to continue sliding against the greenback, although at a slowed pace, market analysts said yesterday.

Like other Asian currencies that were traded lower against the US dollar last week, the weakened NT dollar was mainly due to strong US economic data, with little fallout from the deadly terror attacks in London.

The US unemployment rate fell to a four-year low of 5.0 percent last month from 5.1 percent in May, offsetting weaker-than-expected jobs growth of 146,000 jobs compared with market expectations of 194,000 jobs.

The market awaits a host of economic data to be released next week, including US trade and fiscal deficits to be released on Wednesday.

"If the margins of deficit continue expanding, it would raise awareness about the 'twin deficits' and cap the dollar's upside," the economic journal Nihon Keizai said on its Internet edition on Friday.

Therefore, the NT dollar is expected to remain in the range of NT$32 to NT$32.20 versus the US dollar this week, according to the market analysts.

Taiwan's currency closed at NT$32.04 against the US dollar last Tuesday, down NT$0.243 from Monday's finish, before rebounding NT$0.105 the next day. It ended the week at NT$32.115 against the greenback, down NT$0.428 or 1.35 percent from the previous Friday's close, according to Taipei Forex Inc.

Analysts said the employment market for the non-farming sector in the US continued to improve while the unemployment rate has been dropping.

Moreover, the US Federal Reserve Board is likely to raise interest rates again next month, boosting the value of the greenback at least for the short term, they added.

As a result, the US currency has been rising against all other major currencies. For example, the euro fell to 1.1936 versus the US dollar, and the Japanese yen dropped to 112.20 versus the greenback last Friday.

The analysts forecast the yen will fluctuate around 112.20 versus the greenback this week.
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