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Forex turnover in Taipei swells

Turnover on the Taipei Foreign Exchange swelled to US$2.118 billion yesterday, up from the US$664 million recorded on the previous trading day, because of inward remittances by foreign investors and a US dollar selling spree on speculative trading.

The local currency had its biggest gain in more than three months as the Chinese Nationalist Party (KMT)'s parliamentary victory gave a boost to presidential candidate Ma Ying-jeou (馬英九), who has promised to lower tensions with China and ease restrictions on Taiwanese investment there. China is Taiwan's biggest export market.

"The results will favor Tai-wanese stocks and that will support the Taiwan dollar," said Sadaaki Kondou, assistant general manager of the treasury department at Mizuho Corporate Bank Ltd in Taipei.

"Foreign investors will probably return to Taiwan as they stayed away from the local market before the election," he said.

The NT dollar hit an intraday high of NT$32.293 against the US dollar, but eased to close at NT$32.370 yesterday, an appreciation of NT$0.96.

Bank traders said inward remittances were largely used for stock purchases by foreign investors, who registered NT$22.924 billion in net stock purchases yesterday.

Traders said the US dollar was under heavy selling pressure in global markets as market participants anticipate further interest rate cuts by the Federal Reserve and poor earnings results by banks hard hit by the subprime mortgage crisis weaken the currency.

The US dollar hit a 1.5 month low against the euro and the yen, respectively, on the European market.

The NT dollar may rise to its highest level since 1997 this year as the KMT's victory boosts economic growth and capital inflows, Societe Generale SA said.

``We believe it's clearly positive for Taiwan,'' Glenn Maguire, chief Asia economist at Societe Generale in Hong Kong, said. ``Taiwan has underperformed South Korea and Japan in recent years because it hasn't had the same access to lower cost of production in China. It hasn't had the ability to shift its production and benefit from the Chinese growth miracle.''

The bank predicts the currency will strengthen to as much as NT$30 to the US dollar by the end of this year, he said. The currency last traded as high in October 1997.

The local dollar will gain to NT$31.5 per US dollar by year-end, according to the median estimate of 23 analysts surveyed by Bloomberg News.
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