The NT dollar weakened to the lowest level against its US counterpart in more than six months yesterday, on concerns that the nation’s downside risks to economic growth are increasing.
The local currency fell NT$0.059, or 0.19 percent, to close at NT$31.489 versus the greenback in Taipei trading, the lowest closing since Feb. 22, when it ended at NT$31.495.
In the morning session, the NT dollar once plunged more than NT$0.141, or 0.45 percent, to trade at NT$31.571 — the lowest intra-day level in six months — under mounting pressure to sell after the recent release of a spate of negative economic data, prompting market concerns over Taiwan’s economic outlook.
Turnover was US$1.593 billion yesterday on the Taipei Forex Inc. Including turnover on the smaller Cosmos Foreign Exchange, total transactions reached US$2.08 billion in Taipei trading yesterday, data from the two foreign exchanges said.
On Monday, the Ministry of Economic Affairs reported that export orders last month grew 5.52 percent year-on-year — the slowest pace since the SARS epidemic in April 2003. In particular, annual growth of export orders from China decelerated sharply to 1.73 percent last month, from 17.66 percent in the previous month, while that from Japan also dropped substantially to 1.69 percent last month from 14.89 percent in June, the ministry reported.
The latest money aggregates statistics released by the central bank on Monday also reflected a weaker financial market outlook and the continuing outflow of net foreign capital. M1B, a money supply gauge, registered a 5.77 percent decline last month from a year earlier, the slowest since April 2001, following a drop of 3.04 percent in June.
Foreign institutional investors were net sellers of local equities yesterday, offloading NT$2.5 billion (US$79.4 million) in local shares, data provided by the Taiwan Stock Exchange showed.
So far this month, foreign investors have sold a net NT$30.16 billion in Taiwanese shares, compared with a net purchase of NT$13.9 billion in local shares by their domestic counterparts over the same period of time, the data showed.
A local currency trader said the weakness of the NT dollar also came at a time when a renewed strength of the US currency against most Asian currencies spurred demand for the greenback.
“But the central bank, as it did in the past, would not let the local currency drop too much, too fast,” said the trader at the Union Bank of Taiwan (聯邦銀行), who preferred to remain anonymous.
He said the central bank had intervened in the market late in the session to help recoup some of the NT dollar’s early losses.
The central bank, however, said in a faxed statement yesterday that the currency was “relatively stable,” as the currency’s drop yesterday was in line with those made by South Korean and Singaporean currencies, as well as other major Asian units.
While the recent weakness in the NT dollar and other Asian currencies has aroused market worries that a “U-turn” for Asian units is approaching, a Citigroup report released last week said the general appreciation trend should continue for most Asian currencies, albeit at a slower pace in the near term.
“While the US dollar might gain further, its room is becoming increasingly limited, given domestic economic and financial woes,” Huang Yiping (黃益平), a Hong Kong-based Citigroup economist, wrote in the report dated Friday. “Asian currencies as a group should continue to strengthen over time, not only against a basket of currencies but also against the US dollar.”
For the NT dollar, Citigroup predicts the currency to trade at NT$31.0 against the US dollar by the end of December and further appreciate to NT$30.8 by the end of next March. It will continue rising to NT$30.5 and NT$30.2 by the end of second quarter and third quarter next year respectively, the report said.
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