After its recent gains, the New Taiwan dollar fell yesterday -- recording the largest fluctuation among the traded currencies -- on speculation the central bank sold it to counter Thursday's biggest gain against its US counterpart since 2001.
"There's speculation of intervention by the central bank" to sell NT dollars "after the Korean won fell quite a lot," said Benson Liu, a currency trader at International Bank of Taipei (
The won yesterday posted its sharpest decline against the US dollar since July 15. This, Liu said, may have spurred other Asian central banks to sell their currencies to prevent rival regional exporters from undercutting prices and luring overseas buyers away.
The NT dollar yesterday fell NT$0.182 to close at NT$32.198 against its US counterpart, its largest decline since July 5, according to Taipei Forex Inc. The currency on Thursday had its biggest gain since May 29, 2001, and the highest close since Aug. 16.
Turnover reached US$1.53 billion yesterday, compared with US$1.98 billion the previous day.
The local currency opened yesterday at NT$32.117 and fluctuated between NT$32.030 and NT$32.310 during the session.
Despite speculations that the nation's central bank might have intervened in the market to cap the NT dollar's strength, the Bank denied doing so in a statement.
Overseas demand for Taiwan's stocks may counter any central bank sales of the local currency, said Gary Huang, a currency trader at Union Bank of Taiwan (
The NT dollar had its biggest weekly gain in more than seven years as global investors poured funds into stocks.
"If the central bank sold the Taiwan dollar, it would probably be to get the currency at a weaker level at the start of the day before stock inflows appear," Huang said. "That will help ease the Taiwan dollar's appreciation."
Money managers overseas this week bought a net NT$24 billion (US$746 million) of Taiwan's shares, according to Taiwan Stock Exchange figures. Net purchases on Jan. 4 were the biggest since a record reached on Dec. 28.
In South Korea, the won fell for the first day in six after the government announced a probe into speculative trading and relaxed limits on overseas investment to curb gains in the currency.
The won had risen 2.5 percent over the past five days, closing yesterday at the strongest since the Asian financial crisis of 1997-1998.
Following an emergency meeting of government and central bank officials yesterday, South Korean Vice Finance Minister Kwon Tae-shin said the recent volatile movements in the currency market were abnormal.
"This development can have a negative impact on the economy. We will therefore use all our authority and power to fight it," Kwon said, adding that "we will crack down hard on market-destabilizing speculative acts."
Kwon said the government would curb dollar loans from abroad while easing regulations on overseas investment by South Koreans, thereby weakening the local unit.
However, dealers said the won was expected to continue rising gradually against the US dollar because of robust exports and the global weakness of the US currency as investors bet that US interest rates will not rise that much further.