Speculation over currency sell-off pushes NT lower


Sat, Apr 16, 2005 - Page 11

The nation's currency had its lowest close in two weeks on concern the central bank will sell dollars to protect exporters against Japanese rivals that have benefited from a slumping yen. Japan's yen was headed for its fifth weekly drop.

The New Taiwan dollar weakened NT$0.082 against its US counterpart to close at NT$31.699, the weakest close since March 30, on the Taipei foreign exchange market. The currency declined NT$0.102 against the greenback before noon, in line with the weakening yen and the euro.

Turnover was US$965 million, up from US$738.5 million the previous day.

The NT dollar, declining for a second week, was also under pressure from falling stock shares. Investors based outside the country sold a net NT$7.99 billion (US$252.2 million) of Taiwanese shares yesterday, more than twice the NT$3.35 billion sold on Thursday, according to Taiwan Stock Exchange data. For the week, foreign investors sold a net NT$12.74 billion of Taiwanese shares and for the month as of yesterday, NT$9.57 billion, the stock exchange said.

The Chung Hwa Institution for Economic Research (中經院) on Thursday cut its growth forecast to 4.05 percent from 4.37 percent because of sluggish export growth. Exports account for almost half of the nation's economy.

The institute predicted the NT dollar will gradually climb to NT$31.31 against the US dollar by the end of the year, appreciating 6.32 percent from last year.

If the local currency further appreciates to break NT$30 against the greenback, growth in the export sector may slow and the economy will only grow 2.51 percent for the year, it said.

The nation's exporters may find it harder to compete as the yen's slide against the US dollar lowers the cost of Japanese products abroad. The NT dollar is up 0.7 percent over the past three months and the yen down 5.8 percent.

"The central bank will probably be keen to prevent the Taiwan dollar's appreciation against currencies of Taiwan exporters' competitors," Dariusz Kowalczyk, investment strategist at CFC Securities Ltd, said in Hong Kong. "The Taiwan dollar will come under pressure."

The central bank may not want its currency to rise after the nation's second trade deficit of the year.

The Ministry of Finance on April 7 said exports rose 6.9 percent last month from a year earlier to US$15.8 billion, while imports increased 14.9 percent to US$16.2 billion, leaving a trade deficit of US$399 million.