The NT dollar gained for a second day yesterday against the US dollar, thanks to continued capital inflows as foreign investors snapped up Taiwanese shares ahead of president-elect Ma Ying-jeou's (馬英九) inauguration ceremony on Tuesday, a currency trader said yesterday.
The local currency also gained support from exporters' selling of US dollars and the lack of an aggressive intervention by the central bank in the foreign exchange market, said the trader, who requested anonymity.
At its close in Taipei trading, the NT dollar surged NT$0.22, or 0.72 percent, to NT$30.66 yesterday, after it climbed NT$0.122, or 0.4 percent, on Thursday.
Turnover hit US$1.161 billion at Taipei Forex Inc yesterday, up from US$1.142 billion on Thursday. Including turnover at the smaller Yuantai Foreign Exchange Inc, total transactions reached US$1.557 billion in Taipei trading yesterday.
“The NT dollar has shown an obvious market volatility this week, although the currency was actually little changed compared to last Friday’s closing price,” the trader said.
The NT dollar weakened NT$0.349 (1.14 percent) against the US dollar in the first three days of the week, but managed to rise a total of NT$0.342 (1.11 percent) in the last two days, resulting in a decline of just 0.03 percent against the greenback for the week, Taipei Forex Inc’s tallies showed.
“The NT dollar is likely to continue its recent correction as investors are waiting to see how the new administration delivers on its campaign promises,” the trader said.
The three major institutional investors led by foreign investors bought a net NT$24.1 billion in local shares yesterday, driving the benchmark TAIEX up 40.23 points, or 0.44 percent, to close at 9197.41 on the Taiwan Stock Exchange.
The NT dollar has appreciated 5.5 percent so far this year as the central bank wanted to use the higher exchange value of the local unit to curb import inflation.
“The recent fall of the NT dollar reflected the US dollar rebound, uncertainty in the global economy and profit taking by foreign portfolio investors,” Citi Investment Research economist Cheng Cheng-mount (鄭貞茂) wrote in a research report yesterday.
But Cheng said he remained bullish about the NT dollar outlook assuming a stable domestic economy, improving cross-strait relations and the central bank’s attitude to tolerate more NT dollar appreciation.
The Citigroup economist forecast the NT dollar to rise 8 percent year-on-year and trade at NT$29.8 against the US dollar at the end of the year.
Meanwhile, Lehman Brothers lowered its forecast for the NT dollar and other Asian currencies on concern that rising oil prices may temper growth in exports from the region, the Bloomberg Newswire reported yesterday, citing a Lehman report published on Thursday.
The report said it had scaled back its bullish calls for Asian currencies against the US dollar in the near term and predicted the NT dollar to trade at NT$30.90 this quarter, compared with its earlier estimates of NT$30.20.