The New Taiwan dollar yesterday rose to an 11-month high against the US dollar on the back of hot-money inflows driven by expectations of further monetary easing by central banks, traders said.
The NT dollar gained 0.34 percent, or NT$0.11, to close at NT$32,073 against the greenback in Taipei trading as liquidity support outweighed concerns over the nation’s lackluster economic fundamentals, a trader at a local bank said on condition of anonymity.
The drastic increase in turnover to US$1.14 billion yesterday, up 64 percent from US$696 million a day earlier, lent support to global funds taking shelter in the local currency, which is relatively stable, compared with peers elsewhere, another trader from a local bank said.
“The NT dollar is testing the critical barrier of NT$32 and has a good chance of rising above it if the central bank can tolerate the pace of appreciation,” the trader said, asking not to be named.
The monetary policymaker has showed a distaste for drastic movement of the NT dollar and often intervenes in the final 15 minutes of a day’s trading to slow shifts in the currency’s value.
The central bank appears to have refrained from active intervention these days, likely aware of an irresistible trend developing, the trader said.
Global funds have flowed into Asia after the US Federal Reserve last month halted a move to raise interest rates and the Brexit vote.
The Bank of Japan and European central banks are likely to deepen monetary easing later this month to support economic growth.
Uncertainty over the Brexit fallout prompted Taiwan’s central bank to cut interest rates by 12.5 basis points two weeks ago.
The relatively generous payouts from local shares help attract hot money and account for the ongoing rallies in the TAIEX, the second trader said.
Stock analysts expect local shares to challenge the 9,000-point mark in the near future if major high-tech firms give rosy guidances on their business outlooks as the earnings season unfolds.
That would lure more global funds to the local bourse and boost the NT dollar, the trader said, adding that most local companies distribute dividend payouts this month and next month.
However, some funds might opt to take any profit and leave once they obtain payouts, creating pressure on the local currency, the trader said.
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