The US dollar yesterday rose against the New Taiwan dollar to hit a 29-month high, as foreign investors continued to move funds out of the region in anticipation of ongoing interest rate hikes by the US Federal Reserve.
The greenback rose NT$0.178 to close at NT$30.396, the highest level since March 23, 2020, when the US currency ended at NT$30.405 against the NT dollar.
It opened at the day’s low of NT$30.280, and hit a high of NT$30.416 before the close.
Photo: Chen Mei-ying, Taipei Times
Shortly after the foreign-exchange market opened, investors rushed to dump the NT dollar because of hawkish remarks made by US Federal Reserve Chairman Jerome Powell on raising rates to rein in inflation.
‘BRING SOME PAIN’
In a speech at the annual central bank meeting in Jackson Hole, Wyoming, on Friday, Powell said the Fed would continue to boost interest rates until it was confident the job of dampening inflation was done.
“While higher interest rates, slower growth and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell said in his speech.
After Powell spoke, a growing number of analysts said the Fed would raise its key interest rates by 75 basis points in a policymaking meeting scheduled for next month, dealers said.
The NT dollar also weakened in line with other currencies in the region after Powell’s speech, they said.
DOWNWARD PRESSURE
Such worries over a hawkish Fed also hurt Taiwan’s stock market, adding downward pressure on the NT dollar, dealers said.
Yesterday, the TAIEX tumbled 2.31 percent after foreign institutional investors sold a net NT$24.4 billion (US$802.74 million) in shares.
Dealers said the NT dollar’s heavy losses showed that Taiwan’s central bank scaled back its intervention in the foreign exchange market, in contrast to the bank’s usual daily practice in the past few sessions of acting to slow down the local currency’s depreciation.
With the Fed expected to remain aggressive on interest rates, the US dollar would likely rise to about NT$30.50 against the NT dollar soon, dealers said.
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