Standard Chartered Bank said yesterday it would lower its short-term foreign exchange rating on the NT dollar from “neutral” to “underweight” as the nation faces the slowdown in the global economy.
But the UK bank said it would raise the outlook to “neutral” in the medium term, the bank’s latest research report said yesterday.
While in the near term prices of global crude oil remain an important factor for the nation’s economy and movement of the NT dollar, Standard Chartered expects oil prices to ease gradually in coming quarters and domestic inflation concerns should ease in the fourth quarter.
This “should give Taiwanese policymakers some leeway for moderate TWD [New Taiwan dollar] weakness,” said the report, authored by the bank’s forex strategists Callum Henderson and David Mann as well as Tony Phoo (符銘財), a Taipei-based economist at Standard Chartered.
“On the external side, the fragile US economy is a major concern. As US firms continue to reduce their consumer inventories, this will further dampen demand for Asian exports, including Taiwan,” the report said. “The outlook is also complicated by an increasingly challenging outlook in Mainland [sic] China.”
Based on the report, the NT dollar is likely to trade at NT$30.3 on average against the US dollar by the end of the third quarter and at NT$30.8 by the end of the year.
With the current account surplus set to deteriorate next year over rising imports costs and slowing export volumes, the NT dollar could weaken to NT$31.50 versus the greenback by the end of the first quarter and to NT$32 by the end of the first half of next year, it said.
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