The New Taiwan dollar yesterday ended down 0.58 percent against the US dollar, as Taiwan became the latest nation to join a regional trend of depreciation, one day after Singapore unexpectedly eased monetary policy to battle deflationary pressures, traders said.
The NT dollar shed NT$0.184 to close at NT$31.512 against the US dollar in Taipei trading, the central bank said on its Web site. Turnover rose to US$1.69 billion, an increase of nearly 30 percent from the US$1.3 billion recorded a day earlier.
“For better or worse, traders cut holdings in the local currency in favor of the US dollar, in line with a region-wide trend,” a currency trader at a local bank said by telephone.
Asian currencies have retreated in the past two days after the Monetary Authority of Singapore (MAS) said on Wednesday it is reducing the slope of its policy band for the Singapore dollar in response to “a significant shift” downward in domestic inflation since its last review in October last year.
The Singapore dollar fell by 1.3 percent against the US dollar, its biggest loss against the greenback since 2010, after the MAS cut its inflation forecast for this year to between minus-0.5 percent and 0.5 percent, from the 0.5 percent to 1.5 percent it had estimated three months earlier.
The adjustment is appropriate for ensuring medium-term price stability in Singapore’s economy, MAS said.
“It is uncommon for the city-state to make such a move” ahead of its regular policy meeting in April, the trader said, adding that downside risks must have heightened and policymakers had to respond.
Last week, the European Central Bank (ECB) said it would introduce quantitative easing in a continued attempt to stimulate the listless eurozone economy.
The ECB stimulus package came as no surprise, but the scale was larger than expected, another trader said.
“Hot money” has since flowed to different parts of the world, boosting Asian stock exchanges and currencies.
Foreign institutional players increased holdings in Taiwanese shares by net NT$166.11 million (US$5.28 million) yesterday, even though the TAIEX fell 0.88 percent to 9426.9, Taiwan Stock Exchange data showed.
A strong currency is unfavorable to exports, especially for trade-dependent nations, and global central banks are very conscious of that, the trader said.
The South Korean, Chinese and Japanese currencies dropped steeply in recent days and Taiwan’s central bank must have taken notice, he said, implying policy intervention in the depreciation of the NT dollar.
Looking forward, the NT dollar might find support at NT$31.3 and resistance at NT$31.7 toward the lunar New Year in mid-February, the traders said.
The trading volume might taper off going forward, as investors do not like to hold funds in a market over the holidays, they said.
The US dollar was trading at NT$29.7 at 10am today on the Taipei Foreign Exchange, as the New Taiwan dollar gained NT$1.364 from the previous close last week. The NT dollar continued to rise today, after surging 3.07 percent on Friday. After opening at NT$30.91, the NT dollar gained more than NT$1 in just 15 minutes, briefly passing the NT$30 mark. Before the US Department of the Treasury's semi-annual currency report came out, expectations that the NT dollar would keep rising were already building. The NT dollar on Friday closed at NT$31.064, up by NT$0.953 — a 3.07 percent single-day gain. Today,
‘SHORT TERM’: The local currency would likely remain strong in the near term, driven by anticipated US trade pressure, capital inflows and expectations of a US Fed rate cut The US dollar is expected to fall below NT$30 in the near term, as traders anticipate increased pressure from Washington for Taiwan to allow the New Taiwan dollar to appreciate, Cathay United Bank (國泰世華銀行) chief economist Lin Chi-chao (林啟超) said. Following a sharp drop in the greenback against the NT dollar on Friday, Lin told the Central News Agency that the local currency is likely to remain strong in the short term, driven in part by market psychology surrounding anticipated US policy pressure. On Friday, the US dollar fell NT$0.953, or 3.07 percent, closing at NT$31.064 — its lowest level since Jan.
Hong Kong authorities ramped up sales of the local dollar as the greenback’s slide threatened the foreign-exchange peg. The Hong Kong Monetary Authority (HKMA) sold a record HK$60.5 billion (US$7.8 billion) of the city’s currency, according to an alert sent on its Bloomberg page yesterday in Asia, after it tested the upper end of its trading band. That added to the HK$56.1 billion of sales versus the greenback since Friday. The rapid intervention signals efforts from the city’s authorities to limit the local currency’s moves within its HK$7.75 to HK$7.85 per US dollar trading band. Heavy sales of the local dollar by
The Financial Supervisory Commission (FSC) yesterday met with some of the nation’s largest insurance companies as a skyrocketing New Taiwan dollar piles pressure on their hundreds of billions of dollars in US bond investments. The commission has asked some life insurance firms, among the biggest Asian holders of US debt, to discuss how the rapidly strengthening NT dollar has impacted their operations, people familiar with the matter said. The meeting took place as the NT dollar jumped as much as 5 percent yesterday, its biggest intraday gain in more than three decades. The local currency surged as exporters rushed to
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