Central bank talks up NT dollar

"There will probably be some funds flowing out of Taiwan, weakening the currency. More losses in the stock index may prompt some investors to sell more shares."

Lo Chung, currency trader at Shin Kong Commercial Bank

The central bank reiterated its view that the local currency is "relatively stable," after the NT dollar fell to its weakest close in almost a year.

It is the fourth time since Sept. 19 that the central bank has said it believes that the NT dollar is stable compared with other major currencies.

The bank issued a table that compared the NT dollar's 0.53 percent increase against the US dollar in the past year with the yen's 5.61 percent decline and the euro's 4.55 percent fall.

The bank's calculations were based on exchange rates between 4pm on the close of trade on Oct. 19 last year to the end of trading yesterday.

The NT dollar fell NT$0.099 to close at NT$33.678 against its US counterpart on the Taipei foreign exchange market, its weakest close since Oct. 26 last year, after overseas investors increased sales of the country's shares following the benchmark stock index's decline.

Turnover was heavy at US$1.072 billion, up from US$877 million the previous day.

Money managers outside the country yesterday took out a net US$234 million from the equity market, the most since Sept. 22, according to Taiwan Stock Exchange figures.

They added to net sales of US$687 million in the previous five days, according to stock exchange figures.

The six-day run was the longest stretch of selling since the nine-day period ended on April 22.

Repatriation of such funds will reduce demand for the country's currency.

"There will probably be some funds flowing out of Taiwan, weakening the currency," said Lo Chung, a currency trader at Shin Kong Commercial Bank (新光銀行) in Taipei. "More losses in the stock index may prompt some investors to sell more shares. The Taiwan dollar has room to decline today."

The currency might fall to as low as NT$33.70 this week, Lo said.

A weaker currency makes overseas shipments less expensive and may benefit exporters such as AU Optronics Corp (友達光電), the world's third-largest maker of flat-panel displays used in computers and televisions.

Exports represent about half of the nation's economy.

Taiwan's exports grew last month at the fastest pace in five months, an Oct. 7 finance ministry report showed.

"A weaker Taiwan dollar helped boost the island's overseas sales," said Chang Yaw-tzong (張耀宗), statistics chief at the Ministry of Economic Affairs, on Sept. 23.