Thu, Feb 26, 2009 - Page 11 News List

NT dollar gains on back of Bernanke’s comments

SUPPORT Taiwan’s currency could drop further against its US counterpart but should recover in the second half of the year, a Hong Kong-based analyst believes

BLOOMBERG

The New Taiwan dollar strengthened after US Federal Reserve Chairman Ben Bernanke’s comments that the recession may end this year boosted Asian stocks. Bonds were little changed.

The local currency rose yesterday following a 4 percent advance in the US Standard & Poor’s 500 Index on Tuesday after Bernanke told the Senate Banking Committee that there was a “reasonable prospect” the current recession will end this year.

The TAIEX climbed 1.4 percent and the MSCI Asia Pacific Index gained 1.7 percent.

“Risk appetite improved following the Wall Street rally last night,” said Daniel Soh, an economist at Forecast Pte in Singapore.

The NT dollar strengthened 0.1 percent to NT$34.763 against the US currency as of 3:25pm, according to Taipei Forex Inc. It reached a five-year low of NT$34.862 on Monday.

The local currency has dropped 5.4 percent this year as the global recession reduced demand for Taiwanese goods.

Government reports on Tuesday showed Taiwan’s export orders, an indication of shipments in the next one to three months, tumbled 42 percent last month from a year earlier, while industrial output sank 43 percent, the biggest slides ever. Economists in Bloomberg News surveys had predicted a 38 percent slump for both.

The central bank said on Monday that it would take action in foreign-exchange markets to curb excessive moves after importers complained about the slide in the local dollar. The currency is “relatively stable,” it said for a second straight day on Tuesday.

Taiwan “has the means to defend the currency if it chooses to,” said Joseph Lau, a Hong Kong-based economist at Credit Suisse Group AG.

The currency may drop to NT$35 to NT$35.50 against the greenback in the “near term,” before recovering in the second half of this year, he said.

The central bank may be “benchmarking” the currency with those of rival exporters in the region, including Japan and South Korea, to ensure competitiveness, Lau said.

South Korea’s won has slumped nearly 17 percent against the dollar this year while Japan’s yen has slipped more than 6 percent. Central banks intervene in currency markets by arranging sales or purchase of foreign exchange to influence rates.

Taiwan’s five-year government bonds were little changed.

The yield on the 0.875 percent bond maturing January 2014 stayed at 0.90 percent, according to GRETAI Securities Market, Taiwan’s biggest exchange for bonds. Its price slipped 0.0048, or NT$48 per NT$100,000 face amount, to 99.89.

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