The New Taiwan dollar dropped to its lowest point in nearly six years against the greenback yesterday ahead of the release of what is expected to be more dismal economic data next week amid the deepening global slump, analysts said.
The central bank, seeking to lower borrowing costs, cut annual interest rates on passbook and time deposits to 0.173 percent and 0.771 percent respectively, effective yesterday. The rates were previously at 0.2 percent and 0.921 percent.
The local currency dropped NT$0.1.33, or 0.38 percent, to close at NT$34.808 against its US counterpart, the lowest level since May 2003, Taipei Forex Inc data showed. Altogether, the NT dollar shed 2.2 percent this week and is expected to tumble below the NT$35 level next week when the government is to unveil the latest export order and unemployment figures, dealers said.
“I bet the NT dollar will depreciate below the NT$35 threshold in two or three more trading days, given its performance these days,” a trader at a local bank said on condition of anonymity.
The currency has weakened for 12 days in a row.
The same dealer said he would not be surprised if the NT dollar fell to NT$36 against the greenback, as several foreign banks forecast, to reflect the economic woes.
Turnover amounted to US$680 million on the Taipei Forex, while transactions on the smaller Cosmos Foreign Exchange stood at US$342 million, for a total of US$1.02 billion, figures from the two foreign exchanges showed.
A dealer at Union Bank of Taiwan (聯邦銀行) agreed that the grim economy was to blame for the increasingly cheap NT dollar but added that the South Korean won helped drag the currency down.
“There is no reason for the NT dollar to strengthen given the economic plight the nation is in,” the dealer said by telephone. “The central bank apparently has no choice but to join the depreciation race [instigated by South Korea] to placate exporters.”
The South Korean currency devalued 6.9 percent this week.
The dealer predicted the NT dollar would continue to weaken at a slow, steady rate in the near future.
The local currency opened at NT$34.675 and touched NT$34.85 during the trading session.
Kevin Hsiao (蕭正義), head of UBS Wealth Management Research in Taiwan, voiced skepticism that a weak NT dollar could help ease declines in foreign sales, saying the root cause lay in slumping global demand.
“The [South Korean] won depreciated 35 percent last year but the nation’s exports contracted 32.8 percent in January,” Hsiao said by telephone. “The figures show a weak currency is no remedy for the flagging economy.”