The New Taiwan dollar will weaken because the nation's interest-rate increases aren't matching those in the US, HSBC Holdings Plc's Richard Yetsenga said.
Quickening inflation in the US will probably ensure that the Federal Reserve increases rates by a bigger magnitude than its counterpart in Taiwan, Yetsenga, a foreign-exchange strategist in Hong Kong at HSBC, said in an interview on Monday.
The currency dropped 1.1 percent last month, a sixth month of losses.
Pressure
"There's no reason for the trend to really shift on the Taiwan dollar," Yetsenga said.
"There's greater inflationary pressure in the US and that's why the Fed is likely to continue to tighten more aggressively than the Central Bank of China," he said.
The NT dollar may fall 1 percent to NT$34 against the US currency by the end of the first quarter and to NT$34.50 by the end of June, he said.
The local currency rose NT$0.043 to close at NT$33.605 on the Taipei foreign exchange market yesterday.
Taiwan will raise rates by no more than half a percentage point by the end of next year, said Tony Tsai (蔡東松), director of corporate ratings at Taiwan Ratings Corp (中華信評), a subsidiary of Standard & Poor's.
"The rate increase should be only half of the Federal Reserve Fund rate's pace," Tsai said.
The Taiwan dollar also may keep falling on speculation the central bank will tolerate a weakening currency, Yetsenga said.
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