The New Taiwan dollar is expected to get a boost after the US Federal Reserve surprised financial markets around the globe overnight yesterday with an announcement that it has left its massive stimulus measures intact, dealers said.
As the Fed decided to keep pumping US$85 billion into the market each month through government bond and mortgage-backed securities purchases, ample liquidity is expected to prompt foreign investors to move their funds into Asia, a move that could lift the value of currencies in the region, including the NT dollar, dealers said.
After the Fed announcement following a two-day policymaking meeting that it is maintaining its bond-buying program, the US dollar index, which tracks the greenback’s movement against the currencies of the US’ major trading partners, fell at one point to its lowest level since mid-February.
In Asia, the Malaysian ringgit and the Thai baht led their regional counterparts in a rise on expectations that more spill-over effects on the back of foreign inflows from overseas will send non-US dollar currencies even higher.
Dealers said that as its Asian counterparts had rallied against the US dollar in yesterday’s session, the NT dollar is expected to follow suit and appreciate against the greenback when the local foreign exchange market reopens on Monday after the four-day Mid-Autumn Festival holiday.
On Wednesday, the US dollar closed down NT$0.008 to close at NT$29.752 in moderate trade as many investors stayed on the sidelines to await the conclusion of the Fed’s policymaking meeting.
Dealers said the South Korean won might also strengthen against the US dollar after that nation’s currency market reopens on Monday after the holiday.
Central banks in Asia, including Taiwan’s, are expected to step in to prop up the US dollar in a bid to cap the gains posted by their currencies for the sake of export growth, dealers said, adding that another round of currency depreciation competition is expected to start soon.