The New Taiwan dollar yesterday plunged to its lowest against the US dollar in almost two years, on the back of fears the US Federal Reserve could take a more hawkish approach to tightening in the wake of the latest US consumer price index (CPI) report, dealers said.
The NT dollar fell by NT$0.118 to close at NT$29.823 against the US dollar, the lowest level since June 5, 2020, when the local currency closed at NT$29.839 against the greenback.
Dealers said that soon after the local foreign exchange market opened, the US currency attracted strong buying, as investors took their cue from the US CPI report, with the index rising 8.3 percent last month, faster than a consensus estimate of 8.1 percent, although the figure was lower than March’s 8.5 percent increase.
CPI growth last month was still the highest in almost 40 years, leaving investors expecting the Fed to speed up the speed of its rate hike cycle launched in March, which has caused an exodus of foreign funds from Taiwan.
The Fed raised its key interest rates by 25 basis points in the middle of March and another 50 basis points early this month.
Dealers said the heavy losses on the local equity market, with net sales of NT$10.32 billion (US$346 million) of shares on the main board, increased the downward pressure on the NT dollar.
The TAIEX ended down almost 400 points, or 2.43 percent, at the day’s low of 15,616.68 points.
The fall was led by the bellwether electronics sector, as investors expect rising interest rates to make tech stocks at home and abroad less attractive, dealers said.
Before the local foreign exchange market closed, central bank Governor Yang Chin-long (楊金龍) told a meeting of the legislature’s Finance Committee that he would not rule out the bank intervening in the market to prevent further NT dollar volatility and to stabilize the foreign exchange market.
The central bank took to the trading floor in March and last month, selling US dollars to shore up the NT dollar, a move which saw the country’s foreign exchange reserves fall two months in a row.
Despite the flight of some foreign funds, Taiwan remains awash in liquidity, which should help the local economy steam ahead, Yang said.
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