The New Taiwan dollar was dethroned as the year’s top performer in Asia as the slowest economic expansion since 2012 limited gains and prompted banks, including top forecaster ABN Amro Group NV, to cut estimates for the currency.
The NT dollar climbed 2.5 percent in the first half, contributing to a five-month slump in exports.
ABN Amro this week revised its year-end projection to what would be a five-year low, saying there is an increasing likelihood of the central bank cutting interest rates.
“We expect the central bank to be more tolerant of a weaker exchange rate to stimulate exports and inflate the economy,” ABN Amro analysts Roy Teo (張惠龍) and Arjen van Dijkhuizen wrote in a report on Thursday.
“A combination of a policy-rate cut and intervention to weaken the currency are likely,” they added.
The NT dollar fell 0.3 percent this week and 0.1 percent yesterday to NT$31.77 against the greenback. The currency is now little-changed for the year and its performance is slightly behind Hong Kong’s pegged dollar among Asian currencies. The NT dollar was ranked first for most days from April through last month and as recently as Tuesday.
ABN Amro sees NT dollar at NT$32.5 at the end of this year, compared with a previous estimate of NT$31.5. Credit Agricole CIB cut its forecast to NT$32 from NT$31.7, while Bank of Tokyo-Mitsubishi UFJ Ltd reduced its prediction to NT$32 from NT$31.5.
GDP increased 0.64 percent last quarter from a year earlier, compared with 3.37 percent in the previous three months. While it is still a minority view, more analysts are considering the possibility of a rate cut, with DBS Group Holdings saying one may come next month if the economy does not recover.
Stock inflows of US$6.3 billion in the first half buoyed the NT dollar even as the greenback’s strength and easing in some economies such as South Korea caused most Asian currencies to weaken. Taiwan has kept its policy rate at 1.875 percent since June 2011.
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