The New Taiwan dollar climbed the most in four weeks yesterday as the currency continued a rally of 4.5 percent since Taiwan and China agreed to allow cross-strait expansion by financial institutions and increase direct flights.
“Strong demand from China will help boost exports and support a recovery in the economy,” said Lucas Lee (李志安), an economist at Mega Securities Co (兆豐證券) in Taipei. “The NT dollar may continue to rise this week.”
The NT dollar rose 0.9 percent to close at NT$32.375 against the greenback yesterday on turnover of US$2.367 billion. It earlier touched NT$32.228, the strongest level in more than seven months.
The NT dollar is “relatively stable,” the central bank said in a faxed statement.
Meanwhile, Xinhua news agency cited Wang Yi (王毅), the director of China’s Taiwan Affairs Office, as saying in Chongqing last week that more than 600,000 tourists from China would visit Taiwan this year.
Chongqing Municipality signed 49 cooperative agreements worth 38.3 billion yuan (US$5.6 billion) last week with Taiwanese enterprises, Xinhua said.
The currency is “playing catch up” after two days of holidays in Taiwan, said Tim Condon, head of Asian research at ING Groep NV in Singapore.
It dropped to an almost seven-year low of NT$35.297 on March 3. Forward contracts indicated the currency would strengthen to NT$31.01 in a year’s time.
Global weakness of the dollar and strong demand for equities are also behind the NT dollar’s strength, said Sean Callow, a currency strategist with Westpac Banking Corp.
“The NT dollar’s rally should continue,” Sydney-based Callow said. “I don’t see why NT$32 won’t be tested. The central bank will intervene to slow its rise but it’s tough to reverse.”
Central banks intervene by arranging sales or purchases of currencies to influence exchange rates. Dollar purchases may slow the pace of gains in the local currency, helping exporters.
Taiwan’s export orders, an indication of shipments in the next three months, dropped for the seventh time in April, declining 21 percent from a year ago.
The nation’s economy may contract 2.97 percent this year, the government forecast in April, reversing its November estimate for 2.12 percent growth.
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