The New Taiwan dollar yesterday strengthened the most since March, a sign that the central bank is loosening its grip on the world’s most stable currency.
The NT dollar rose 0.54 percent to close at NT$29.152 per greenback, the strongest since April 2018. The currency has broken out of a tight range, even as it continues a months-long pattern that has seen it pare gains at the close of trading.
Other Asian currencies also rose against the greenback yesterday, with the South Korean won up 1.2 percent.
The central bank has acted repeatedly to limit strength in its currency, a move that has become particularly visible to traders since July and has helped boost local exports.
The NT dollar was the least volatile among 31 major exchange rates against the greenback in the past three months, after the pegged Hong Kong dollar, even as foreign inflows into local technology stocks increased demand for the currency.
“The central bank will probably be more aggressive if there is excessive volatility and exuberance, but because the Taiwan dollar’s gain is in line with other Asian exchange rates, we can rule out the excessiveness,” Malayan Banking Bhd senior currency strategist Christopher Wong (黃經隆) said.
Central bank Governor Yang Chin-long (楊金龍), who refers to currency intervention as “smoothing,” on Thursday said that the NT dollar was not “strong” when measured against trade-weighted valuation metrics.
The comments indicated to analysts that the central bank is more comfortable with appreciation.
“Yang’s comments regarding the NT dollar during his press conference are noteworthy,” Australia & New Zealand Banking Group Ltd head of Asia research Khoon Goh (吳昆) said.
Because Yang does not see the NT dollar as overvalued on trade-weighted terms, the central bank “will be open to allowing it to appreciate, but of course they will want to influence the pace,” he said.
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