The New Taiwan dollar yesterday declined 0.78 percent, or NT$0.253, in Taipei trading to close at NT$32.621 against the US dollar, deeper than other currencies in the region, central bank figures showed.
The fall represented a six-year low and came after the government on Friday cut its forecast for GDP growth this year by more than half to 1.56 percent, from 3.28 percent in May.
Combined turnover on the Taipei Foreign Exchange and Cosmos Foreign Exchange markets amounted to US$1.36 billion, a relatively moderate volume.
“The local currency might soon drop below the NT$33 level as the central bank is likely seeking to catch up with major trade rivals in raising export competitiveness,” a currency trader at a local bank said by telephone.
The South Korean won lost 0.77 percent yesterday, while the Singaporean dollar weakened 0.38 percent and the Japanese yen retreated 0.13 percent.
The Chinese yuan closed down 0.04 percent, one week after the People’s Bank of China lowered its fixing guidance by 1.9 percent, jolting foreign exchange markets across the world.
“The NT dollar depreciation is reasonable and practical in light of the nation’s negative inflationary reading, allowing the central bank room for monetary easing to support economic growth,” the trader said.
Exports are now projected to contract for the year, dragged down by a global slowdown and growing competition from Chinese technology firms, the Directorate-General of Budget, Accounting and Statistics said.
The NT dollar might find support at NT$35 as seen during the global financial crisis, the trader said.
However, exporters have called for a weaker NT dollar, with some suggesting a benchmark of NT$36 to help them compete with Chinese rivals.
The NT dollar opened at NT$32.435 and fluctuated between NT$32.170 and NT$32.530 during the session.
In a related development, a cheaper yuan made the currency less attractive among Taiwanese as yuan deposits saw a monthly retreat of 0.47 percent for the first time to 336.65 billion yuan last month, the central bank said yesterday.
Deposits at domestic banking units totaled 282.92 billion yuan last month, down 0.16 percent from one month earlier, while deposits at offshore banking units shed 0.2 percent to 53.73 billion yuan, the central bank said.
It is the first time both Taiwanese companies and individuals trimmed yuan holdings, attributable mainly to higher risk awareness, a central bank official said, adding that local banks refrained from offering high interest rates to encourage yuan deposits.
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