The New Taiwan dollar is likely to rise further and challenge the NT$29 mark against the US dollar this week as foreign investors continue to move funds into Taiwan, market analysts said on Saturday.
If share prices on the Taiwan Stock Exchange steam ahead in reflection of foreign institutional buying, demand for the local currency will increase accordingly to put more downward pressure on the greenback, they said.
After Minister of Finance Chang Sheng-ford (張盛和) told lawmakers late last month that government-led funds were ready to pick up bargains on the local bourse, a move which aimed to shore up investor confidence, both institutional and retail investors have scrambled to buy in the past few sessions, they added.
On Friday, the US dollar closed NT$0.031 lower against the NT dollar at NT$29.116, off an early low of NT$29.049, after foreign institutional investors bought a net of NT$15.33 billion (US$527 million) worth of local shares on the bourse.
Friday’s greenback closing level was the lowest since Nov. 12, when the US dollar closed at NT$29.090, while the TAIEX ended at 7,580.17 points, a high since Oct. 9.
Turnover in the stock trading session on Friday expanded to more than NT$120 billion, evidence of large foreign fund inflows, analysts said.
Ahead of the massive net buy on Friday, foreign institutional investors also served as net buyers of NT$10.61 billion worth of local shares a day earlier, lending support to the NT dollar.
In addition to foreign fund inflows, a rising Chinese yuan on the back of improving manufacturing activity in China has provided more momentum to its regional counterparts, including the South Korean won and the NT dollar, analysts said.
A dealer from a European bank said after the US Federal Reserve launched a third round of quantitative easing in mid-September, the spillover effect on the Asian region has been pushing up the value of regional currencies against the US dollar.
The dealer said that as long as the Chinese yuan continues an upwards trend against the US dollar amid optimism over the Chinese economy, its counterparts in the region will follow suit to post gains against the greenback.
The strength of regional currencies has given traders in the local foreign exchange market strong encouragement to buy into the NT dollar, paving the way for the local currency to test the NT$29 mark over the next few sessions, he said.