Fri, Aug 01, 2008 - Page 11 News List

NT dollar weakens on economic woes

By Kevin Chen  /  STAFF REPORTER

The NT dollar recovered slightly in late session yesterday after plunging as much as NT$0.157 against the US dollar in the morning session amid concerns that the pace of the nation’s economic activity is slowing.

At the end of Taipei trading, the NT dollar closed NT$0.008 lower at NT$30.590 versus the greenback, its lowest close since May 19, when the unit traded at NT$30.548, central bank’s tallies show.

Turnover was US$1.79 billion on the Taipei Forex Inc, up from US$1.546 billion on Wednesday.

A currency dealer said outward remittances by foreign investors and central bank intervention were spotted during the session.

It was estimated that foreign investors have remitted more than US$2 billion out of local markets in the past three days, said the dealer at the Union Bank of Taiwan (聯邦銀行) who preferred to remain anonymous.

The dealer predicted that the NT dollar may trade between NT$30.5 and NT$30.8 in the near term.

The central bank did not want to comment on whether the recent NT dollar weakness was due to outward remittances by foreign fund managers.

It attributed the decline to increased demand for US dollar, Lin Sun-yuan (林孫源), deputy director-general of the bank’s department of foreign exchange, said yesterday.

So far this week the NT dollar has fall by NT$0.183, or 0.61 percent, against the US currency, the central bank’s data showed. Year to date, the local unit has appreciated by 5.72 percent against the greenback, the data showed.

The NT dollar’s recent weakness came after several economists projected the slowing down of exports and unimpressive domestic demand are likely to drag down the economy in the second half of the year. But it also came after foreign investors liquidated local equities amid regional capital outflows.

In an emerging market research report released yesterday, Barclays Capital said the short-term outlook for NT dollar was mixed.

On Wednesday, Standard Chartered Bank lowered the NT dollar’s short-term rating to underweight from neutral due to global economic slowdown.

“Despite the improved political climate, we expect net FDI [foreign direct investment] outflows of US$2 billion, and foreign institutional investors [FIIs) have liquidated US$6.5 billion in local equities year to date,” the Barclays report said.

“Given positive carry [trade] and heightened uncertainty, our preference is to recommend long USD/TWD positions,” the report said.

Additional reporting by Crystal Hsu

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