The New Taiwan dollar plunged yesterday, triggered by a renewed weakness in the regional currencies, led by the Japanese yen.
The currency opened at NT$34.02, but succumbed later to a massive demand for greenbacks from commercial banks and foreign institutional investors, traders said.
The NT dollar plunged as much as 1.1 percent to NT$34.44 against the US dollar, its weakest level since May 28. The currency closed at NT$34.37 on a turnover of US$700 million.
Analysts said that fears that the Japanese currency, which has weakened 0.8 percent this week, will fall further provided local investors with an excuse to sell the NT dollar.
Thanks to close trading ties between Taiwan and Japan, the local currency often mimics the currency of the world's second-largest economy.
"Fears that the Japanese yen may drop further is raising concerns," said Jassemine Wu (
The yen fell to a three-week low yesterday against the dollar on concern Japan is slipping into a recession. It slid to ?122.21 against the dollar from ?121.69.
Also hurting the NT dollar yesterday, traders said, was a report in the Chinese-language media that quoted analysts as saying the NT dollar may depreciate further as a result of the yen's woes.
While the central bank yesterday said it would let the market decide the exchange rate, the nation's top monetary authority issued a stern statement urging analysts to be careful with their comments.
"The bank hopes those issuing predictions on the market should conduct careful research and objective analysis so that personal opinions do not disrupt the normal operation of the market," the two-paragraph statement said.
Adding to the worries was a Reuters poll of economists that predicted a GDP growth rate of 2.91 percent for Taiwan this year -- far lower than consensus estimates.
The World Bank also said yesterday that it plans to lower its 2001 economic growth forecasts for Asian countries because of a sharper-than-expected slowdown in the US, according to Bloomberg.
Many economists expect regional currencies to weaken further, led by the NT dollar, as the currency has remained relatively resilient compared to competing economies.
The local currency has declined 3.8 percent in the past six months, while the Japanese yen has dropped 8.1 percent and the South Korean won 7.8 percent.
Currencies elsewhere in Asia fell also yesterday -- thanks to a cocktail of economic and political worries.
The South Korean won lost 0.2 percent yesterday on the back of the weakness in the Japanese yen, while the Thai baht fell 0.2 percent amid Thailand's efforts to prop up its currency.
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