The New Taiwan dollar yesterday weakened 0.5 percent, or NT$0.144, to NT$29.05 in Taipei trading, the lowest in more than 18 months, as foreign players slashed holdings in pursuit of higher yields elsewhere, dealers said.
It is the first time since September 30, 2020, that the local currency ended weaker than NT$29 against the US dollar, the central bank’s Web site showed.
Combined turnover at Taipei Forex Inc and the smaller Cosmos Forex Inc totaled US$2.49 billion.
Photo: CNA
The NT dollar’s decline has much to do with global funds redeploying assets after central banks announced monetary tightening policies, currency traders said.
For example, the US Federal Reserve said that it would raise interest rates at each policy meeting this year, with analysts looking at a rate hike of 50 basis points next month to help rein in runaway consumer prices and production costs.
Expectations of rate increases prompted foreign players to cut local shares by a net NT$34.04 billion yesterday as higher yields wooed assets, traders said.
Lockdowns throughout China also fueled concern that Taiwanese firms that operate in China could take a hit, traders said.
Financial Supervisory Commission Chairman Thomas Huang (黃天牧) told a meeting of the legislature’s Finance Committee yesterday that local shares with average yields of 3.96 percent are more attractive than the 10-year US Treasury at 2.7 percent.
Local listed firms made record earnings of NT$5.2 trillion last year and are to distribute generous dividends later this year, Huang said, adding that ongoing share price corrections are likely transient in nature.
Traders said that the central bank would not let the NT dollar free-fall, but would intervene to keep it above NT$29.5.
Without intervention, the NT dollar would have dropped below NT$29.1, traders said, adding that the pressure to sell is likely to remain for the short term.
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