The New Taiwan dollar weakened to its lowest point in six-and-a-half years against the greenback yesterday on the back of a sharper decline on the TAIEX and a drop in the South Korean won, dealers said.
The NT dollar shed 0.6 percent, or NT$0.22, to NT$35.174 against the US currency at the close of trading in Taipei, the lowest since October 2002 when the currency traded at NT$35.268. The NT dollar has dropped 7.04 percent this year.
“I’m not surprised at the pace of the depreciation after the South Korean won devalued 2.3 percent,” a currency trader at a local bank said on condition of anonymity. “Though the central bank has denied taking part in a [devaluation] race, it appears receptive to a weaker NT dollar,” the dealer said.
Trade volume was US$1.02 billion on the Taipei Forex, the company’s data showed. Including US$372 million on the smaller Cosmos Foreign Exchange, transactions amounted to US$1.392 billion, statistics showed.
The central bank issued a brief statement saying the NT dollar was relatively stable compared with the won. South Korea is Taiwan’s main export rival.
The market has said central bank Governor Perng Fai-nan (彭淮南) would not allow the NT dollar to fall below the NT$35.30 low of the last recession in 2001.
The dealer said he doubted there was a so-called “Perng’s bottom line” if the won keeps slumping.
“Taiwan would lose export orders to South Korea if the NT dollar were stronger than the won,” the dealer said.
Another dealer at a local bank said the NT dollar would drop below NT$36 this year.
“The decline in the NT dollar is bound to break the 2001 level as a currency is a gauge of a nation’s economic strength,” the dealer said by telephone, asking not to be named. “The downturn this time is far worse than the tech bubble collapse seven years ago.”
The government has forecast the economy could contract 2.97 percent this year. In 2001 it shrank 2.17 percent.
The dealer said the plunge in the local stock market helped accelerate the NT dollar’s weakening.
The TAIEX dropped 131.32 points, or down 2.9 percent, to close at 4,425.83 on a turnover of NT$75.52 billion with foreign fund managers selling a net NT$12.89 billion.
“The capital outflow would speed up amid the ailing economy,” the currency trader said. “Government efforts to bolster the NT dollar would resist the global trend and prove unwise.”
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