The New Taiwan dollar slumped to a five-and-a-half-year low against its US counterpart yesterday as the global economic downturn continued to mar economies across Asia, dealers said.
The local currency devalued NT$0.34, or 0.99 percent, to close at NT$34.62 versus the greenback, Taipei Forex Inc data showed.
Turnover was US$839 million on the Taipei Forex, while the day’s transactions on the smaller Cosmos Foreign Exchange amounted to US$360 million, adding up to a total of US$1.19 billion, according to figures from the two foreign exchanges.
Analysts linked the NT dollar’s ongoing decline to a sharper fall by the South Korean won as the two countries vied to mitigate the impact of the global downturn on their export-dependent economies. The won depreciated 1.92 percent yesterday.
“The NT dollar could not remain unaffected when Asian currencies all weakened against the US dollar amid the economic downturn,” a dealer at a local bank said on condition of anonymity.
A strong NT dollar would sap local exporters’ competitiveness and encourage profit-taking by currency speculators, the dealer said.
The local currency opened at NT$34.28 yesterday and hovered between NT34.38 and NT$34.40 for most of the day’s trading until the last 15 minutes, which witnessed a selling frenzy worth US$154 million, driving the NT dollar to its lowest level of the day, the dealer said.
The dealer said the NT dollar may not have hit bottom yet, as the economic data unveiled today could turn out to be worse than expected.
The central bank issued a statement for a second straight day saying that the local currency was relatively stable compared with its counterparts.
Another trader said the NT dollar had weakened too slowly before the Lunar New Year holiday and was “catching up” on the fall to reflect the nation’s economic woes.
“Chances are the central bank has seen the economic report and concluded a faster and bigger depreciation is favorable to ease export slumps,” the dealer said by telephone.
The falling NT dollar drew mixed views from the business community.
General Chamber of Commerce (全國商業總會) chairman Chang Ping-chao (張平沼) said there was still room for the currency to devalue as long as the nation counted on exports for economic growth.
“Considering the South Korean won’s performance, the local currency should drop further to trade at NT$35 versus the greenback,” Chang said.
Chinese National Association of Industry and Commerce (工商協進會) chairman Theodore Huang (黃茂雄) disagreed, saying it was time to halt the depreciation lest importers suffer.
Huang said the key to fixing the economy lay in expanding domestic demand and that a weaker NT dollar would prove no panacea.
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