The New Taiwan dollar weakened to a five-year low against the greenback yesterday on concern the economic downturn could be deeper and longer than expected, with the statistics agency scheduled to release major economic data tomorrow, dealers said.
The local currency shed NT$0.23, or 0.67 percent, to close at NT$34.28 agaisnt its US counterpart, the lowest level since December 2003, Taipei Forex Inc data showed.
Trade volume amounted to US$800 million on the Taipei Forex. Including transactions of US$348 million on the smaller Cosmos Foreign Exchange, total turnover reached US$1.148 billion, data from the two foreign exchanges showed.
Analysts attributed the NT dollar’s decline to a bleak economic outlook as the Directorate-General of Budget, Accounting and Statistics is expected to revise GDP figures tomorrow after several foreign institutes put the number in negative figures.
“The nation’s export-dependent economy is likely to contract this year [even] though the government projected a modest growth of 2.12 percent in November,” a currency dealer said, requesting anonymity. “The gloomy outlook has led investors to dump NT dollars in favor of the greenback.”
The trader said the central bank appeared to favor a weak NT dollar after outbound shipments plunged a record 44.1 percent last month.
“The local currency may soon drop to NT$34.50 against the US dollar, given the monetary regulator’s handsoff attitude these days,” the dealer said.
The central bank issued a statement yesterday, reiterating that the local currency was relatively stable compared with its foreign counterparts.
Another dealer painted a grimmer picture, saying the local currency could trade at NT$35.30 against the greenback as during the regional financial crisis in 1997.
“The NT dollar is likely to slide below its 1997 level in light of the severity and magnitude of the global financial turmoil that is eroding the nation’s economy,” the dealer said on condition of anonymity.
Hong Kong-based brokerage CLSA predicted on Feb. 4 that Taiwan’s economy would decline 11 percent this year on falling exports of up to 30 percent.
Morgan Stanley forecast a week later the contraction would hit 6 percent, citing similar reasons.