The New Taiwan dollar yesterday ended down 0.58 percent against the US dollar, as Taiwan became the latest nation to join a regional trend of depreciation, one day after Singapore unexpectedly eased monetary policy to battle deflationary pressures, traders said.
The NT dollar shed NT$0.184 to close at NT$31.512 against the US dollar in Taipei trading, the central bank said on its Web site. Turnover rose to US$1.69 billion, an increase of nearly 30 percent from the US$1.3 billion recorded a day earlier.
“For better or worse, traders cut holdings in the local currency in favor of the US dollar, in line with a region-wide trend,” a currency trader at a local bank said by telephone.
Asian currencies have retreated in the past two days after the Monetary Authority of Singapore (MAS) said on Wednesday it is reducing the slope of its policy band for the Singapore dollar in response to “a significant shift” downward in domestic inflation since its last review in October last year.
The Singapore dollar fell by 1.3 percent against the US dollar, its biggest loss against the greenback since 2010, after the MAS cut its inflation forecast for this year to between minus-0.5 percent and 0.5 percent, from the 0.5 percent to 1.5 percent it had estimated three months earlier.
The adjustment is appropriate for ensuring medium-term price stability in Singapore’s economy, MAS said.
“It is uncommon for the city-state to make such a move” ahead of its regular policy meeting in April, the trader said, adding that downside risks must have heightened and policymakers had to respond.
Last week, the European Central Bank (ECB) said it would introduce quantitative easing in a continued attempt to stimulate the listless eurozone economy.
The ECB stimulus package came as no surprise, but the scale was larger than expected, another trader said.
“Hot money” has since flowed to different parts of the world, boosting Asian stock exchanges and currencies.
Foreign institutional players increased holdings in Taiwanese shares by net NT$166.11 million (US$5.28 million) yesterday, even though the TAIEX fell 0.88 percent to 9426.9, Taiwan Stock Exchange data showed.
A strong currency is unfavorable to exports, especially for trade-dependent nations, and global central banks are very conscious of that, the trader said.
The South Korean, Chinese and Japanese currencies dropped steeply in recent days and Taiwan’s central bank must have taken notice, he said, implying policy intervention in the depreciation of the NT dollar.
Looking forward, the NT dollar might find support at NT$31.3 and resistance at NT$31.7 toward the lunar New Year in mid-February, the traders said.
The trading volume might taper off going forward, as investors do not like to hold funds in a market over the holidays, they said.
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