The New Taiwan dollar fell to its lowest in more than two months on speculation oil importers are buying the US currency as crude prices rise.
The NT dollar fell NT$0.129, or 0.42 percent, to close at NT$31.002 against the US currency, the weakest since March 3, Taipei Forex Inc said.
Turnover on the Taipei Forex was a hefty US$1.502 billion, up from US$1.145 billion the previous day.
The local currency weakened for a third day after oil reached a record of US$126.98 per barrel overnight. The NT dollar also dropped on speculation the US Federal Reserve would stop cutting interest rates, reducing the appeal of Taiwan’s higher-yielding assets.
“Oil importers seem to be buying the US currency,” said Sadaaki Kondou, assistant general manager of treasury at Mizuho Corporate Bank Ltd in Taipei. “There is speculation the Fed won’t cut rates, which is encouraging US dollar buying. Sentiment for the US currency is quite strong.”
The NT dollar could depreciate to about NT$31.10 this week as the central bank may stop declines to curb imported inflation, Kondou said.
The NT dollar is the best performer in Asia after the yen this year, with a gain of 4.6 percent.
Merrill Lynch & Co raised its forecast for the NT dollar “to reflect the changing sentiment following the increased political ties with China” following the Chinese Nationalist Party’s (KMT) win in the March presidential election.
The Taiwanese currency would rise to NT$30 in December compared with a previous estimate of NT$31, Merrill Lynch said in a research report on Tuesday.