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NT dollar closes at highest level in nineteen months

The NT dollar closed at its highest level since May 2006 on speculation the nation's interest-rate advantage over the US encouraged investors to bring money home.

The local currency gained for a sixth day, the longest stretch since the start of October, as exporters converted their overseas earnings before the Lunar New Year holidays, which run from today through Monday. The US Federal Reserve cut its target rate by 1.25 percentage points last month to 3 percent, pushing its benchmark below Taiwan's 3.375 percent rate.

"The reversal in the interest-rate position between the US and Taiwan now favors the Taiwan dollar," said Hideki Hayashi, a foreign-exchange strategist at Shinko Securities Co in Tokyo. "Exporters tend to buy the local currency before a long holiday as they don't want to hold foreign currencies."

The NT dollar gained NT$0.060 or 0.2 percent to NT$32.010 against the US dollar at the 4pm close of onshore trading, according to Taipei Forex Inc. It rose as high as NT$31.994.

The NT dollar may trade between NT$32 and NT$32.30 in a month as the central bank halts gains, Hayashi said.

Taiwan's bond and stock markets were closed yesterday.

Meanwhile, the central bank said some overseas investors were avoiding buying stocks after converting money into the local currency that was designated for equity purchases.

The central bank instructed local banks to inform their overseas clients to use the funds remitted for their intended purpose.

"This is to prevent foreign investors from using the equity markets as a guise for speculating in the local currency market," the central bank said in a statement.
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