The New Taiwan dollar yesterday surged to NT$29.89, its strongest level in 13 years in the morning session against the US currency, but pared its gains later after alleged central bank intervention. It rose NT$0.15, or nearly 0.5 percent, to end at NT$30.45.
The US dollar has continued its recent weakness after the US Federal Reserve said it might step up its US$600 billion bond purchase plan to bolster the US economy.
“The fact that the US government could take further economic stimulus measures means its economy remains weak,” a dealer at the Bank of Taiwan (BOT, 臺灣銀行) said. “That will lead to more hot money inflows [into emerging markets] and further weaken the US dollar against the euro and other currencies like the NT dollar.”
PHOTO: CHANG CHIA-MING, TAIPEI TIMES
The NT dollar’s appreciation yesterday matched the rise in the euro and major Asian currencies against the US dollar, the central bank said in a statement. The Japanese yen rose 1.01 percent and the South Korean won rallied 0.49 percent versus the greenback, while the euro appreciated 1.92 percent, the central bank’s data showed.
Dealers said the central bank intervened to help stabilize the local currency and to prevent the nation’s economic growth from derailing.
“To keep the nation’s economic growth on track, the central bank is trying to keep the NT dollar at a relatively stable level, which local technology companies can tolerate,” said the BOT dealer, who preferred to remain anonymous.
Exports are one of the major pillars of Taiwan’s economic growth and electronics goods make up the biggest proportion of those exports.
In the long term, “Asian currencies will stick to the existing uptrend,” Citigroup economist Cheng Cheng-mount (鄭貞茂) said.
That strength would come from robust stock market momentum, Cheng said, saying that as long as overseas fund managers keep buying local stock, the demand for local currency would grow.
“Taiwanese stocks are attractive to foreign investors because of robust economic growth and strong demand for its electronic goods,” Cheng said.
Yesterday, overseas fund managers bought a net of NT$8.2 billion (US$274.6 million) in local stocks, bringing the net purchase to NT$43.93 billion since early this month, according to the Taiwan Stock Exchange’s tallies.
The NT dollar is expected to stabilize at the NT$30.5 level versus the US dollar this quarter, Taipei-based Polaris Research Institute (寶華綜合經濟研究院) has projected.
Because the US Senate has passed US President Barack Obama's plan to extend the Bush-era income-tax cut bill, the institute's president Liang Kuo-yuan (梁國源) said that could reduce the possibility of the US Federal Reserve taking another round of quantatative easing measures.
"That tax-cut bill's passage indicates no double-dip recession risk for the US economy. And that would help boost the US dollar," Liang said.
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