The New Taiwan dollar yesterday rose to its highest level against the US dollar in more than 16 months, as local exporters set off a wave of selling ahead of the Lunar New Year holiday next month.
However, the NT dollar might not be able to sustain its current strength for long, given the challenging economic situation in Taiwan, a currency trader said.
The NT dollar rose past the NT$29 psychological mark to NT$28.979 versus the greenback during the middle of the session yesterday, but later retreated, closing up NT$0.022 at NT$29.088 against the US dollar — its highest level since Sept. 15 last year.
On the smaller Cosmos Foreign Exchange market, the local currency closed at NT$28.985 against the US dollar.
Daily trading volume stood steady at US$996 million yesterday, with US$663 million on the Taipei Forex and US$333 million on the Cosmos.
“The strong seasonal demand for the NT dollar helped boost the level of its appreciation against the greenback,” a Taipei-based currency trader at Union Bank of Taiwan (聯邦銀行) said by telephone.
Many local exporters sell off their US dollar assets ahead of the Lunar New Year holidays in order to meet their need for NT dollar capital, with some companies returning part of their overseas capital during the period, the trader said.
The trader also said that seasonal demand could tentatively boost the NT dollar to reach NT$28.8 against the greenback in the short term.
However, the central bank may not wish to let go of the NT dollar’s rising trend, given the country’s sluggish economic situation, the trader added.
Meanwhile, the trader said he expected the momentum of the US dollar to become stronger if the US Federal Reserve ends its quantitative easing measures earlier than expected.