The New Taiwan dollar rose 0.64 percent to NT$31.062 against the US dollar in Taipei trading yesterday, taking cues from major currencies worldwide after the US Federal Reserve voted unanimously to keep interest rates steady, traders said.
“Foreign-exchange markets across the world breathed a temporary sigh of relief following the Fed decision,” a currency trader at a local bank said by telephone.
The Fed on Wednesday signaled that the US economy is nearly ready to stand on its own, but added that the process would be gradual.
Most US monetary policymakers believe the Fed plans to raise borrowing costs for the first time in nearly a decade sometime this year, foreign media have reported.
The central bank in Taiwan issued a statement yesterday evening saying major currencies strengthened against the greenback at faster paces, affirming the global trend.
Turnover rose to US$1.32 billion yesterday, compared with US$882 million a day earlier, according to Taipei Foreign Exchange Market and Cosmos Foreign Exchange Market.
The pickup in the NT dollar is unfavorable for Taiwanese exports, which have contracted 5.7 percent for the past five months amid weaker-than-expected external demand, the trader said anonymously, because the central bank frowns on currency comments.
Earlier this week, academics called on the central bank to depreciate the local currency to support exports, saying that the nation’s main trading rivals are engaged in aggressive monetary easing.
The NT dollar is likely to consolidate in the short run, hovering near NT$31 per US$1, and could soften to NT$31.5 on renewed expectations of interest rate hikes in the US, likely in September, the trader said.
Interest rate hikes would attract global funds to the US in pursuit of higher yields for US debts.
The trader said the local currency had better depreciate to NT$31.6 to boost export competitiveness.
The central bank on Wednesday reiterated that exporters should seek to strengthen their technology, product mix, service and marketing strategy to boost earnings, rather than rely on favorable foreign-exchange rates.
The central bank must strike a balance between exports and imports when guarding foreign-exchange market stability, the bank’s Deputy Governor Yang Chin-lung (楊金龍) said.
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