The New Taiwan dollar saw its biggest gain in four years yesterday after China on Thursday evening unexpectedly revalued the yuan, which had been pegged to the US dollar for a decade.
Joining other Asian currencies that advanced in response to the yuan revaluation, the NT dollar gained NT$0.305, or 0.96 percent, to close at NT$31.648 against the greenback on the Taipei foreign-exchange market yesterday. This rate is the NT dollar's highest close since July 1, when the currency climbed to NT$31.644 against the US dollar.
Turnover grew to US$1.185 billion amid hectic trading, surging by 61.1 percent from US$735.5 million the previous day.
The local currency opened at NT$31.70 versus its US counterpart and climbed to a high of NT$31.55 in the morning session, which later triggered intervention from the nation's central bank to cap the currency's rise, according to traders.
The central bank bought US dollars at around NT$31.50 via oil-importing firms, Reuters reported, citing traders.
"Unlike the yuan, the exchange rate of the NT dollar should be determined by the market," said George Chou (
"We will hold on to the rule and make some adjustments that allow the currency to reflect fundamental economic conditions," he said.
The NT dollar's rise came after the People's Bank of China announced on Thursday night that it was scrapping the yuan peg to the US dollar and setting the Chinese unit against a trade-weighted basket of currencies, although it did not reveal what these currencies were. The currency was fixed at 8.11 yuan to the US dollar compared to the old rate of 8.2765 yuan, effectively a 2 percent revaluation.
Local analysts said yesterday they don't expect the NT dollar to continue its gains in the long term.
"I don't think the local currency will keep going up," said Calvin Chen (
"The NT dollar has no ground to appreciate as a strong currency like the yuan due to Taiwan's weakening exports and economic growth," Chen said.
Taiwan saw a trade deficit last month as high prices for oil and raw materials weighed on exports. Exports grew 3.1 percent to US$14.88 billion last month, while imports rose 2.5 percent to US$15 billion last month from a year ago, the slowest pace since June 2003 and August 2003 respectively, according to the latest report released by the Ministry of Finance.
As a result, the government and various research institutions have been lowering their GDP forecasts for the export-dependent local economy, with the lowest prediction of 3.63 percent made by the statistics bureau, and the highest of 3.8 percent by the Chung-Hua Institution for Economic Research (CIER,
Under the circumstances, the central bank is likely to keep the NT dollar at low levels to limit the impact on the nation's economic growth.
The strong advance of the NT dollar yesterday will not have much of an impact on local manufacturers, as the exchange rate is close to its level at the end of last month, Minister of Economic Affairs Ho Mei-yueh (何美玥) said.
Taiwanese exporters will not fall behind competitors in neighboring countries as a result of the local currency's appreciation, as the yuan revaluation boosted all Asian currencies, Ho said.
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