The New Taiwan dollar yesterday climbed by 0.4 percent to NT$30.695 against its US counterpart, its highest in more than five months, casting a shadow over exporters’ profitability if the rise persists, analysts said.
The local currency rose to NT$30.45 in the morning, above the central bank’s reported tolerance level of NT$30.5, but retreated toward the close of trading in Taipei due to reported interventions, a currency trader with a local bank said by telephone.
The NT dollar has strengthened 3.2 percent this year — with much of the gains concentrated over the past few days — on the back of foreign fund inflows that elevated the local bourse to 15-year highs midsession on Monday and Tuesday.
“The central bank, which has repeated its resolve to maintain currency stability, will not tolerate drastic volatility, but will step in to keep the closing price of the NT dollar below NT$30.5 in the foreseeable future,” the trader said.
Technology firms have voiced concerns over likely earnings losses caused by a stronger NT dollar.
Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the world’s largest contract chipmaker, earlier said it arrived at its second-quarter earnings guidance based on an exchange rate of NT$31.03.
The strengthening NT dollar might weaken the gross margin of Advanced Semiconductor Engineering Inc (ASE, 日月光半導體), the world’s largest chip packager, by 0.4 or 0.5 percentage points, local media said.
“The central bank will not sit around and watch exporters suffer because they play an important role in upholding the domestic economy,” the trader said.
The nation’s GDP growth is not strong enough to allow a strong currency, the trader said.
The ongoing wave of appreciation is unlikely to last long as hot money tends to come and go quickly, the trader said, adding that the slowdown in trading volume attested to his speculation.
Turnover at foreign exchange markets yesterday totaled US$1.47 billion, lower than US$1.71 billion on Tuesday and US$1.86 billion on Monday, Taipei foreign exchange data showed.
The Chung-Hua Institution for Economic Research (CIER, 中華經濟研究院) agreed, saying it is premature for firms to worry about softening profits, as the pickup in the NT dollar might prove short-lived.
“As in the past, foreign funds may soon pull out after taking profits in local shares,” CIER president Wu Chung-shu (吳中書) said in a telephone interview.
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