The New Taiwan dollar rose past the NT$29 mark to its highest level in more than a year against the US dollar yesterday morning, as the Chinese yuan and other major Asian currencies rallied.
The NT dollar climbed to NT$28.959 versus the greenback — its highest level since Sept. 1 last year — from its opening exchange rate of NT$29.16.
The currency later retreated, but still closed NT$0.06 higher at NT$29.09 on the Taipei Forex market yesterday.
On the smaller Cosmos Foreign Exchange market, the local currency closed at NT$28.992 against the US dollar.
“The recent rise of the Chinese yuan, as well as the confirmation of the quantitative easing strategy in the US following President Barack Obama’s re-election, both helped boost the NT dollar’s appreciating trend against the US dollar,” a Taipei-based currency trader at Union Bank of Taiwan (聯邦銀行) said by telephone.
However, the NT dollar might not be able to sustain its current strength for long and might even fall to a level between NT$29.5 and NT$30 given the sluggish economic situation in Taiwan, the trader said.
Although the NT dollar may climb above the critical NT$29 mark in the near future in line with the rise of other major Asian currencies, a weak stock market might mean the nation lacks a driver to attract foreign capital inflows, he said.
The recent modest trading volume in the currency markets provide more evidence of this trend, the trader added.
Daily trading volume stood at US$946 million yesterday, with US$631 million on the Taipei Forex and US$315 million on the Cosmos, he said.
The latest research note by Yuanta-Polaris Research Institute (元大寶華綜合經濟研究院) shared the trader’s views, saying the appreciation of the NT dollar may narrow in the near future following the central bank’s intervention to help maintain local exporters’ competitiveness.