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NT rise ends, but not for long: dealers

Currency traders at the Taipei Forex Inc's trading room stand up in excitement during yesterday's session. The New Taiwan dollar peaked at NT$30.677 to the US dollar before midday before giving up its gains and closing at NT$30.950. PHOTO: FANG PIN-CHAO, TAIPEI TIMES

The New Taiwan dollar ended its seven-day rise yesterday, with turnover at US$3.498 billion, second only to the US$3.9 billion registered on Jan. 16 this year, when foreign capital flowed into the country following the opposition party's victory in the legislative election.

The NT dollar's rising trend against the greenback was averted shortly after hitting an intraday high of NT$30.677 before midday, and eventually gave up all its gains to close NT$0.021 lower at NT$30.950.

Outward remittances by foreign investors and insurance companies were spotted, though the volume of exporters' selling the US dollar remained heavy, dealers said.

The central bank reiterated that it would "monitor the market closely to see whether some foreign investors are engaging in foreign exchange speculation," as there is evidence that some are keeping too much in NT dollar savings in their accounts for more than a week without investing in the local securities, in line with the purpose stated on their application.

Spencer Lin (林孫源), deputy chief of the central bank's foreign exchange bureau, told reporters in a media briefing yesterday afternoon that foreign investors who fail to comply with the regulation and invest less than 97 percent of the money remitted in local securities would receive warnings from the nation's monetary authorities.

Meanwhile, a new measure is expected to lead to some outflow of domestic funds to help ease the extra liquidity problem facing the nation's capital markets, which will ease the pressure of NT dollar appreciation, Lin said. The measure will lift the ceiling of overseas investments by local insurance companies from the 35 percent to 45 percent of their net assets.

The new measure will come into force next week, Financial Supervisory Commission Vice Chairwoman Susan Chang (張秀蓮) said yesterday at a press briefing.

Chang said the commission would implement the measure in stages, allowing 10 life insurers and one non-life insurer to apply to increase their overseas investment ceiling by 5 percent to 40 percent during the first stage. That would enable insurers to remit a maximum of NT$275 billion (US$8.89 billion) in funds for overseas investments next week at the earliest, she said.

Local insurance companies have US$68 billion in overseas assets invested, just below the 35 percent of their total net value, which would be US$74.2 billion, Lin said.

Foreign investors registered NT$5.38 billion in net selling on the local bourse yesterday, ending three days of consecutive net stock purchases, with the value exceeding NT$50 billion.

"It is a sign that some foreign investors began to take profits from their investments in the local stock market and channel the money out," said a dealer who requested anonymity.

The dealer added that the market participants may also take profits as the exchange rate nears NT$30.7, meeting projections from some investment banks for the full year.

Nevertheless, dealers said the bullish trend of the local currency remains intact.

"As more foreign capital is expected to flow into the nation in the future, while the greenback is under tremendous pressure due to a weak economy and further cuts in the interest rate, the NT dollar's appreciation will not stop here," said another dealer, who also preferred to remain anonymous.

Additional reporting by Joyce Huang
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