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.
At least three lenders issued downgrades after data released on July 31 showed second-quarter growth missed all estimates in a Bloomberg survey. 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.
The NT dollar fell 0.3 percent this week and 0.1 percent on Friday to NT$31.770 against the greenback, Taipei Forex Inc prices show.
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 July and as recently as Tuesday last week.
Elsewhere in Asia, favorable economic and international trade conditions in most Asian countries makes it unlikely that the region’s central banks will deem it necessary to raise interest rates to offset the impact of weaker currencies, Goldman Sachs Group Inc said.
While most Asian currencies have depreciated this year, policy makers do not need to increase borrowing costs in the short term because inflation levels in several nations remain “comfortable,” and risks in trade and foreign debt payments are limited, Goldman analyst Fiona Lake wrote in a research note on Thursday.
Eleven of 12 Asian currencies tracked by Bloomberg have declined against the US dollar this year. The Malaysian ringgit is the worst performer, slumping 11 percent. Indonesia’s rupiah has weakened 8.4 percent. The South Korean won has fallen 6.4 percent.
With the exception of Indonesia and India, Asia has “well anchored” expectations for inflation, which makes the region less likely to be affected by currency weakness, Lake said. Lower commodity prices also will help control inflation, she said.
On the trade side, most nations will report surpluses and the adequacy of their foreign-currency reserves will help cover their external debt, the analyst said.
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