Sun, Jun 24, 2018 - Page 14 News List

US dollar hits one-year high in Taipei

STABILITY:Improving economic data and assurances by politicians that Italy would not leave the bloc boosted the euro, which recorded a weekly increase of 0.5 percent

Staff writer, with CNA and Reuters

The US dollar on Friday rose to its highest level against the New Taiwan dollar in a year, after rising more than 1 percent this week.

The strong gains by the US dollar resulted from simmering trade friction between the US and China, prompting investors to park their funds in US dollar-denominated assets for a safe haven, dealers said.

A rate hike cycle carried out by the US Federal Reserve also gave an additional boost to the currency, they said.

The US dollar rose NT$0.305, or 1.01 percent, from NT$30.002 a week earlier to close at NT$30.307 on Friday, the highest level since June 10 last year, when the greenback ended at NT$30.376 against the NT dollar.

On Tuesday alone, the US dollar gained NT$0.184, or 0.61 percent, as foreign investors moved funds out of the region amid rising fears over a trade war between Washington and Beijing.

On Monday, US President Donald Trump threatened to impose a 10 percent tariff on US$200 billion of Chinese goods after China last week announced that it would slap a retaliatory 25 percent tariff on US$36 billion of US goods, starting from July 6, warning that another US$16 billion of US goods could face tariffs after a review.

Beijing’s move came soon after the US announced the imposition of a 25 percent tariff on US$50 billion of Chinese goods, including machinery, robotics, aerospace components, information technology devices and auto products, starting on July 6.

On Thursday, the US dollar also gained more than NT$0.1 against the NT dollar on expectations that Taiwan’s central bank would leave its key interest rates unchanged in a quarterly monetary policymaking meeting that day, the dealers said.

As the market had anticipated, the central bank maintained interest rates intact for an eighth consecutive quarter amid a rate hike cycle in the US, which further depressed the NT dollar against the greenback, they said.

Throughout the week, foreign banks and local importers stood on the buy side for the US dollar, they added.

After Thursday’s policymaking meeting, Taiwan’s central bank Governor Yang Chin-long (楊金龍) said the current nominal and real interest rates in Taiwan remained appropriate, compared with other currencies, implying that the central bank would not raise interest rates in the near term, which prompted currency traders to think the central bank would maintain its monetary policy until the end of this year.

As the Fed has hinted that it would raise interest rates two more times this year, the US dollar is expected to remain attractive to investors, which could lead to more fund outflows further dragging down the NT dollar, the dealers said.

Foreign investors are expected to receive a large chunk of cash dividends from locally listed firms over the next few months, so fund repatriation is expected to become more intense, which could further bolster the US dollar, they said.

Elsewhere, the euro on Friday climbed as traders were encouraged by improved regional economic growth data and new assurances by Italian politicians that their nation would not leave the single currency.

The euro registered a weekly gain of nearly 0.5 percent against the US dollar, reversing the prior week’s 1.35 percent drop tied to the European Central Bank’s hint that it would hold interest rates through summer next year.

The euro’s advance, together with a rebound in commodity-linked and emerging-market currencies, pressured the US dollar, which ended lower on the week.

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