The US dollar rose against the New Taiwan dollar on Friday, gaining NT$0.034 to close at NT$32.33, from NT$32.436 on Friday last week, as foreign investors moved funds out of the region, dealers said.
In the wake of the fund outflow, other regional currencies trended lower against the US dollar, which added downward pressure on the Taiwan dollar throughout the session, although buying by Taiwanese exporters in the local unit gave some support to the currency, capping the losses, the dealers said.
The greenback opened at NT$32.27 and moved between NT$32.25 and NT$32.36 before the close. Turnover totaled US$513 million during the trading session.
The US dollar opened lower against the NT dollar as traders here locked in gains they had built up a session earlier, but the greenback soon recouped its losses and traded in positive territory as some foreign investors remitted their funds back to their home markets, the dealers said.
A move by the People’s Bank of China to lower the yuan’s reference rate against the US dollar also led the NT dollar to move lower, they added.
Despite the selling in the NT dollar, turnover in the local foreign exchange market remained moderate as many traders stayed on the sidelines after the European Central Bank (ECB) left its key interest rates unchanged in a policymaking meeting held a day earlier, the dealers said.
The ECB’s decision hurt the appetite of traders in the region to take risks, so that they either shunned non-US dollar-denominated assets or stayed off the trading floor, they said.
Trading in the local foreign exchange market is expected to remain quiet amid cautious sentiment next week before the US Federal Reserve wraps up a two-day policymaking on Wednesday, the dealers said.
With South Korea’s won gaining for a fourth week amid signs of a stabilizing Chinese economy, strategists are questioning how much longer the rally can run.
The won has risen this month as data showed a nascent recovery in Asia’s largest economy and the Fed signaled a slower pace of tightening.
Yet the US dollar has recovered over the last two days as the market’s attention turned to the Fed’s meeting next week, while the Bank of Korea’s reduction of its growth and inflation forecasts raised the chance of an interest-rate cut in the coming months.
“There’s a risk the Fed might sound a bit more hawkish to prepare the market for a rate hike in June,” said Sim Moh Siong, a foreign-exchange strategist at Bank of Singapore Ltd in the city-state. “Under that scenario, the room for the won to further rally may be limited.”
The currency rose 0.3 percent this week to close at 1,143.22 won to the US dollar and declined 0.9 percent on Friday, data compiled by Bloomberg show.
The won has rallied 0.9 percent in the past month, the best performance after Malaysia’s ringgit among emerging-market Asian currencies.
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