Sat, May 10, 2008 - Page 11 News List

NT dollar reverses losses after sell-off of greenback

SALE TRIGGER The 10 most active currencies in Asia other than the yen weakened against the greenback this week. The NT dollar is one of the most vulnerable

By Kevin Chen  /  STAFF REPORTER, WITH BLOOMBERG

The NT dollar rose 0.56 percent yesterday, reversing a 1 percent retreat in the previous session, on selling of the US dollar by exporters and foreign banks, dealers said.

Premiums for offshore US dollar non-deliverable forward (NDF) contracts turned into discounts — indicating the market was expecting the NT dollar to strengthen against the greenback — which also triggered sales of the US dollar in the session, they added.

At its close in Taipei trading, the NT dollar rose NT$0.171 to NT$30.653 against the greenback. For the week, the local currency declined by 0.65 percent.

Turnover narrowed to US$1.154 billion on the Taipei Forex Inc from US$3.083 billion the previous day. After including turnover at the smaller Yuantai Foreign Exchange Inc, total transactions reached US$1.695 billion in Taipei trading yesterday, down from US$3.839 billion on Thursday.

The transaction total of US$3.839 billion on Thursday was the second-highest this year after the US$3.932 billion recorded on Jan. 15 and the third-highest in history on a daily basis, the exchange’s tallies showed.

“The NT dollar opened lower against its US counterpart and at one point broke the NT$30.9 level. But as US dollar buying spree lost stream in the afternoon; it triggered a strong US dollar sell-off at the NT$30.7 level that boosted the NT dollar to show turnaround for the day,” a local currency trader, who requested anonymity, said by telephone yesterday.

Despite yesterday’s rise, the NT dollar will still be under pressure in the short term amid concerns of foreign capital outflow in light of the recovering greenback, the trader said.

But in the longer term, the upward trend of the local currency would remain unchanged because the central bank favors a stronger NT dollar to help control import-driven inflation, he added.

Across the region, all 10 of Asia’s most active currencies outside Japan weakened against the US dollar this week as investors shunned emerging-market assets as well as on speculation that record oil prices would dampen the region’s economic growth and that the US Federal Reserve may have finished cutting interest rates.

Among Asian currencies, the NT dollar would “under-perform” because it is one of the most vulnerable within Asia to a US economic slowdown as it relies more on exports, Standard Chartered Plc said in a research report dated Wednesday.

The UK bank also lowered its forecasts for gains in the yuan in the second and third quarters after China’s central bank slowed the pace of appreciation, as well as cutting forecasts for the Philippine peso because of “slowing growth, rising inflation and negative real rates,” the report said.

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