Fri, Oct 24, 2008 - Page 12 News List

NT dollar drops to a 17-month low against greenback

By Crystal Hsu  /  STAFF REPORTER

The New Taiwan dollar yesterday slumped to its lowest level in 17 months against the greenback on sustained demand for the US currency and foreign capital outflows, traders said.

The NT dollar fell 0.92 percent, or NT$0.306, to close at NT$33.296 to the US dollar, its weakest since May 23 last year, foreign exchange data showed.

Turnover was US$1.613 billion on the Taipei Forex Inc.

Including US$550 million turnover on the Cosmos Foreign Exchange, total transactions reached US$2.163 billion, data from the two foreign exchanges showed.

The local currency opened at NT$32.99 and dropped as much as 1.3 percent, or NT$0.377, to NT$33.408 near midday, prompting the central bank to intervene and reverse the weakening slightly, traders said.

The central bank reiterated in a statement the NT dollar remained stable unlike the South Korean won, which has plunged 33.6 percent this year. The NT dollar has only weakened 2.6 percent.

A dealer at Ta Chong Bank (大眾銀行) attributed the greenback’s strong performance to foreign funds’ withdrawal from emerging markets around the world amid global financial tumult.“In times of international economic downturn, many investors seek recourse with US dollar and government bonds to hedge risks,” the trader said by telephone, requesting anonymity.

While expecting the NT dollar to weaken, the trader said he was surprised at the pace of the fall.

The trader speculated the NT dollar would continue the downward trend as long as foreign investors keep pulling out of the local financial markets. Together, they sold a net NT$428 million of local shares yesterday, helping drag the TAIEX down 132.08 points, or 2.71 percent, to 4,730.51.

The trader forecast the NT dollar would trade at NT$34 against the greenback next month and depreciate to NT$34.25 before its gradual recovery in late January.

A dealer at Union Bank of Taiwan (聯邦銀行) agreed in part. The trader, who also asked not to be named, said the NT dollar would remain weak in the next two or three months with sporadic rebounds.

“The local currency is likely to drop to NT$33.3 per US dollar unless the won falls below the 1,500 level,” he said. “The two currencies are closely tied in terms of export competition.”

The trader said the central bank would not let the NT dollar fall too sharply within a short period of time.

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