The New Taiwan dollar recorded its biggest weekly gain since 2012 as foreign funds snapped up local shares amid signs the US would not raise interest rates this year and China would step up measures to spur growth.
Overseas investors bought a net US$813 million of Taiwanese stocks this week, the biggest inflow since May. Shanghai equities had their best week in four months on speculation the central bank would ease monetary policy after announcing an expanded relending program to boost credit.
A gauge of US dollar strength fell this week as US data on retail sales, producer prices and inventories all missed estimates, undermining the case for monetary tightening this year.
“The market is now trading the theme of funds returning to emerging markets,” said Andrew Tsai (蔡耀德), an economist at KGI Securities Co (凱基證券) in Taipei. “Expectations for a Fed rate hike are fading, so the [US] dollar is weakening, and sentiment around China is turning both in terms of policy and markets.”
The NT dollar rose 1.1 percent this week, the most since September 2012, to close at NT$32.505 against the greenback, Taipei Forex Inc prices show. The local dollar fell 0.2 percent on Friday as one-month non-deliverable forwards declined 0.8 percent.
The central bank’s first rate cut since 2009 last month stirred speculation it might ease again at its next meeting in December. A delay in US tightening would make this easier for Taiwan as a wider gap in interest rates would risk excessive outflows.
“If the Fed doesn’t raise rates, Taiwan may cut rates again as the economy isn’t good,” Tsai said. “Theoretically, the market should be trading this theme, but now it’s more about global fund flows.”
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