Sun, Apr 01, 2018 page14

• NT dollar flat as greenback recovery slows

  QUARTERLY CHALLENGE? One expert said much of the US dollar’s recent gains were due to quarter-end flows and questioned whether it would hold without that support

  • Staff writer, with CNA and Reuters
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  The New Taiwan dollar yesterday closed unchanged at NT$29.120 against the US dollar.

  Turnover totaled US$270 million during the trading session.

  The greenback opened at the day’s high of NT$29.120 and moved to a low of NT$29.068 before rebounding.

  The NT dollar closed at NT$29.170 a week earlier.

  The turnover was low because many foreign currency traders were away from the trading floor yesterday, when Taipei was the only foreign exchange market open in the world to make up for the loss of a trading session during the Tomb Sweeping Day holiday from Wednesday to Friday next week, dealers said.

  On Friday, the US dollar stalled against its peers as a recovery seen earlier in the week petered out ahead of the new quarter, which could bring renewed pressure on the greenback.

  Against a basket of six other major currencies, the US dollar was down 0.2 percent to 89.985.

  The US dollar index was up nearly 0.6 percent for the week, during which it touched a one-week high of 90.178 on factors including the easing of concerns over global trade protectionism and perceived progress on North Korea’s nuclear weapons program.

  “A key part of the [US] dollar’s recent gains were quarter-end flows, with many investors seen to have closed out short positions on the currency to lift the dollar,” Barclays PLC Tokyo-based senior strategist Shin Kadota said.

  “It remains to be seen if the [US] dollar can retain its gains next week when the new quarter begins, as it will no longer have support from such flows,” Kadota said.” Much of the challenging themes will remain the same in the next quarter, such as the health of the US economy and trade issues.”

  The US dollar index was down more than 2 percent for the quarter, its fifth straight quarter of decline.

  The US currency, which plumbed a 16-month low of ￥104.560 on Monday when trade woes roiled global markets, on Friday shed 0.2 percent to ￥106.245. It has risen 1.5 percent this week, but declined 5.7 percent for the quarter.

  The US dollar’s fall against the yen over the past few months has come despite higher US bond yields. The spread between the 10-year US and Japanese government bond yields reached its widest in a decade this quarter, as the US Federal Reserve has raised interest rates steadily while the Bank of Japan is stuck with monetary easing.

  The yen is often sought in times of market turmoil and there were numerous opportunities for investors to buy the Japanese currency in the first quarter, which was punctuated by unsettling political developments in the White House, trade tensions between the US and China and an end to Wall Street’s bull market.

  “The lack of correlation between [US] dollar/yen and the US-Japan yield spread looks unnatural. Upward pressure on [US] dollar/yen will be significant should the pair re-establish their correlation with the yield spread,” Daiwa Securities Group Inc senior foreign exchange strategist Yukio Ishizuki said.

  The euro nudged up 0.15 percent to US$1.2317, having slipped 0.3 percent this week. It was up 2.6 percent for the quarter, buoyed by prospects of the European Central Bank phasing out its accommodative monetary policy.

  The pound added 0.1 percent to US$1.4031 and crawled away from US$1.4011, a one-week low set the previous day.

  Sterling gained 3.9 percent in the second quarter, its best performance since mid-2015. It was lifted by hopes for a transition Brexit deal — which was eventually agreed earlier this month — and growing expectations that the Bank of England could soon raise interest rates.

  The Australian dollar was up 0.1 percent at US$0.7684, edging away from a three-month low of US$0.7648 touched on Thursday, pressured by the US dollar’s broad bounce and weaker prices of commodities such as iron ore.

  The Australian dollar was down 1.7 percent for the quarter, its yield advantage over the US currency eroded as the Fed has steadily raised rates.

  Major currencies were confined to a narrow range with many of the world’s key markets closed on Friday.
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