The New Taiwan dollar fell yesterday, extending its slide from a year high, after a local newspaper reported that the central bank had introduced spot checks to verify the purpose of purchases of the local currency.
The central bank could issue temporary trading bans to firms engaged in currency speculation, the Taipei-based Apple Daily reported, citing an unidentified bank official.
Bank Governor Perng Fai-nan (彭淮南) said on Friday that overseas investors had NT$500 billion (US$15 billion) in funds “sitting idle” in the country, an excessive amount that could be used for speculation.
“There’s some covering of short positions,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan (聯邦銀行). “The central bank has shown its determination, so people have been relatively nervous.”
The local currency dropped NT$0.025 to close at NT$32.325 against the US dollar, the Taipei Forex Inc said. The currency reached NT$31.995 on Oct. 1, its strongest in a year. The short positions referred to by Tong are bets that the US dollar will weaken against the NT dollar, which has gained 1.8 percent in the past three months.
The monetary authority said on Sept. 30 that the local currency should reflect the economy’s performance and that it would “maintain order” if irregular factors caused excessive volatility.
The bank sent media a document highlighting the benefits of capital controls on Oct. 9, two days after the government reported a 13th monthly decline in exports.
Global funds bought US$13.1 billion more local equities than they sold this year, contributing to a 68 percent jump in the TAIEX.
Taiwan’s 10-year government bonds rose for the first time in three days on speculation the central bank would maintain a relaxed monetary policy.
The monetary authority sold NT$200 billion in certificates of deposit on Friday, less than the NT$203 billion that matured the same day, its Web site said. The benchmark interest rate has been kept at a record-low 1.25 percent since February.
“There’s a lot of money in the market as the central bank has been keeping a loose monetary policy,” said Claire Wang, a bond trader at Polaris Securities Co (寶來證) in Taipei. “The market would turn bearish only if the central bank issues much more CDs than maturing ones to absorb money.”
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