Sun, Nov 11, 2018 - Page 14 News List

Outflows drive NT dollar down

REBOUND:One day after a broad fall, the greenback bounced back to outperform most major currencies on the back of a robust US economy and rising interest rates

Staff writer, with CNA and Reuters

With foreign investors moving their funds out of the nation, the New Taiwan dollar on Friday fell against the US dollar, shedding NT$0.110 to close at NT$30.812, dealers said.

The fund exodus reflected fears that the US Federal Reserve turned hawkish on monetary policy after a two-day policymaking meeting concluded overnight, they said.

The weakness of the NT dollar against the US dollar also reflected a sell-off on the local equity market on Friday, when foreign institutional investors stood on the sell side, they added.

For the week, the US dollar rose NT$0.074, or 0.24 percent, to its highest since Thursday last week, when the greenback closed at NT$30.926.

On Friday, the unit opened at NT$30.750 and moved between NT$30.735 and NT$30.813 before the close of trading. Turnover totaled US$767 million in the session.

The US dollar staged a rebound soon after the local foreign exchange market opened, but the gains were moderate in the morning session, dealers said.

However, selling of the NT dollar escalated in the afternoon, with local traders motivated by the losses incurred by other regional currencies to sell the local currency amid fears the Fed would accelerate its rate hike cycle, they said.

In particular, the South Korea won, which the NT dollar follows closely, fell 1.03 percent against the US dollar, prompting traders to dump the local currency as foreign investors moved more funds out of the region amid concerns over the Fed’s rate hike, they added.

On Thursday, the Fed left its key interest rates unchanged, but said the US economy remained on track to recovery.

“The labor market has continued to strengthen and ... economic activity has been rising at a strong rate,” the Fed said in a statement, which dealers called a more hawkish view on monetary policy.

In addition, foreign institutional investors cut their holdings in local equities, which also increased the downward pressure on the NT dollar and boosted the US dollar further, dealers said.

The US dollar on Friday also rose toward a 16-month high against the euro.

The greenback had on Tuesday fallen broadly following US midterm elections on expectations that the outcome would make further fiscal stimulus measures unlikely.

However, the currency bounced back and on Friday returned to outperforming most major currencies, underpinned by the robust US economy and rising interest rates.

“We’re wary of selling the [US] dollar too soon, because the Fed is still hiking rates into a tightening labor market and trade tensions haven’t gone away,” Societe Generale SA chief foreign exchange strategist Kit Juckes said.

The Fed is widely anticipated to raise interest rates next month, with traders’ expectations at 75.8 percent, compared with 71.1 percent on Thursday, CME Group Inc’s FedWatch tool showed.

Renewed strength in the US dollar — which tends to be boosted by trade war tensions, as it is considered a safe-haven asset — is pushing the offshore Chinese yuan toward 7 yuan per US dollar and has seen the euro slip toward US$1.13.

In foreign exchange markets, investor focus is shifting back to the divergence between the monetary policies of the US and other major economies.

In Japan, where interest rates are expected to stay extremely low, the yen is near a five-week low against the US dollar, last at ¥113.84, and has fallen 1.7 percent over the past 10 trading sessions.

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