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Central bank to halt appreciation

The central bank will continue to put on brakes on the NT dollar's appreciation, which shot to a 32-month high yesterday, as too rapid a rise could hurt exporter profits and competitiveness, dealers said.

However, predictions of a stronger currency are unlikely to ebb soon, as high expectations over stock market prospects after next month's presidential election continued to attract overseas capital, bolstering the NT dollar's strength, they said.

"Judging from the close of NTD-USD non-deliverable forward trading today [yesterday], the local currency still has room for appreciation," said a dealer, who said the NT dollar reflected market speculation of at least a gain against the greenback of between NT$0.12 and NT$0.15 in one week and NT$0.340 and NT$0.395 in one month.

Such anticipation has also triggered selling pressure on the greenback from exporters, a veteran dealer said.

The NT dollar yesterday gained NT$0.107 to close at NT$31.3880 against the greenback -- a new high since NT$31.365 on June 27, 2005.

Yesterday's close was off the intraday high of NT$31.2500 on turnover of US$1.728 billion, up from US$1.512 billion last Friday.

Foreign investors registered NT$17.28 billion in net stock purchases yesterday, a sign that the support for a more liberalized market reaffirmed by both candidates in the presidential debate on Sunday was well-received by investors, dealers said.

Meanwhile, in a central bank briefing yesterday afternoon, economic research division chief Shih Yen (施燕) said continued inflow of foreign capital and a robust stock market performance were likely to lift the annualized growth of M2 market supply from last month's historical low of 1.06 percent. Shih blamed the sluggish increase in last month's M2 money supply on a high base in the same period last year and an economic slowdown.

Central bank data show that last month's M1A money supply grew by 3.26 percent, while the M1B money supply fell by 0.3 percent.
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