The New Taiwan dollar rose 0.5 percent yesterday to NT$33.03 against the greenback as exporters continued to trade US dollars for the local currency in keeping with a tradition normally seen before Lunar New Year, dealers said.
The NT dollar strengthened by NT$0.169 against its US counterpart on a turnover of US$1.492 billion on the Taipei Forex Inc. Including transactions of US$369.5 million on the smaller Cosmos Foreign Exchange, total trade was US$1.861 billion, data from the foreign exchanges showed.
Dealers attributed the latest rally to seasonal adjustments that have been consistently observed for the past decade when exporters exchanged US dollars for NT dollars to meet cash demand prior to Lunar New Year.
“Exporters are responsible for the rise,” said a dealer by telephone, who requested anonymity. “The rally will last about two months, with occasional minor falls.”
The dealer said the local currency should rise as high as NT$32 against the greenback during the adjustment and weaken afterwards amid the economic downturn.
The dealer dismissed links between the NT dollar’s showing and the local stock market, saying the appreciation had little to do with a TAIEX rebound or capital inflows.
“It would be odd for institutional investors to up stakes in local equity markets when economic pointers forecast a downtrend next year,” the dealer said.
Another currency trader at Union Bank of Taiwan (聯邦銀行) had similar views.
The trader, who also asked not to be named, said the NT dollar was entering another bout of seasonal adjustment that would persist until early February, during which the currency could hover between NT$32.70 and NT$33.30 against the greenback.
He agreed the NT dollar would devalue following the adjustment in that the central bank would not allow the currency to outperform its South Korean counterpart to avoid hurting Taiwan’s exports.
The dealer said he doubted the series of rate cuts had contributed to the rallies in the local bourse or the currency.
“Investors may be lured, but cannot be forced to buy stakes in investments they consider unprofitable,” the dealer said by telephone. “The rate cuts may help discourage profit-taking among foreign exchange traders but they fail to provide strong incentives to join the local equity markets.”
The dealer said a better indicator of the NT dollar’s valuation was the Korean won, adding he could not foretell its worth.
“No one knows what will happen tomorrow,” he said.