The NT dollar fell to its lowest level in more than five months against the greenback yesterday on growing concerns about the nation’s export prospects, traders said.
At the close of Taipei trading, the NT dollar dropped NT$0.22, or 0.72 percent, to close at NT$31.09 against the greenback — its lowest close since March 3, when it traded at NT$31.102, data compiled by the Taipei Forex Inc showed.
Turnover was US$2.512 billion.
Including the turnover on the smaller Cosmos Foreign Exchange, however, total transactions reached US$3.242 billion in Taipei, the largest since May 8 when total transactions amounted to US$3.839 billion, data compiled by the two foreign exchanges showed.
In mid-session, the NT dollar plunged by as much as NT$0.350 or 1.14 percent to NT$31.22 — the lowest intraday level since the currency traded at NT$31.392 on Feb. 26 — which prompted the central bank to intervene in the market by selling the US dollar heavily, a local currency trader at Chang Hwa Commercial Bank (彰化銀行) said by telephone yesterday.
“The central bank will do whatever it can to stop the NT dollar from dropping too fast. But honestly, the central bank will not try to unwind the NT dollar’s near-term depreciation trend as it is finding it difficult to fight a market that favors the US dollar across the board,” said the trader, who wished to remain anonymous.
Based on Taipei Forex’s tallies, the NT dollar has dropped for the ninth consecutive session versus the US currency, with a fall of NT$0.683 or 2.25 percent since July 25, as market sentiment turned pessimistic about Taiwan’s economy amid fading expectations about the Chinese Nationalist Party (KMT) government’s new cross-strait trade policies.
But William Lin (林蒼祥), a finance professor at Tamkang University, said he believed the NT dollar’s recent weakness resulted from stronger demand for the US dollar on the international markets, not because foreign fund managers wanted to exit the local capital markets in disappointment over the government’s cross-strait trade liberalization.
“It will take longer time to gauge the effectiveness and impact of the liberalization,” he said.
As domestic demand has yet to show signs of expansion, Liang Kuo-yuan (梁國源), president of Polaris Research Institute (寶華綜合經濟研究院), said the central bank probably thought a cheaper NT dollar would help boost exports.
On Thursday, the Ministry of Finance reported exports had only increased 8 percent last month compared with July last year after an increase of 21.3 percent in June, indicating the US slowdown is affecting Taiwan’s exports.
Liang said containing inflation should be the central bank’s top priority.
“The NT dollar depreciation will make imported raw materials more expensive and raw material costs are higher than last year and still on the rise,” he said.
The central bank said yesterday the local currency was “relatively stable,” adding the currency’s declining was in line with other major currencies against the greenback.
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