The New Taiwan dollar’s fortunes look set to take a turn for the worse as slowing export growth and a resurgent greenback weigh on the local currency.
Equity outflows and tensions in the Taiwan Strait are also exerting pressure on the NT dollar, while a technical indicator suggests it might slide to NT$31.418 per greenback after touching a three-year low of NT$30.599 on Friday.
The local unit yesterday closed at NT$30.710 per US dollar in Taipei trading.
Photo: CNA
Traders are reassessing bullish bets toward emerging markets as China’s economy cools and a three-month rally in the US dollar shows few signs of easing.
The trade-reliant nation is contending with waning demand for its tech shipments, with the worst semiconductor downturn in a decade expected to hurt its chipmakers.
“The Taiwan dollar will continue to see headwinds from the USD volatility, the slowdown in global trade and the global tech cycle which looks to have passed its peak,” said Eddie Cheung (張敬勤), senior emerging markets strategist at Credit Agricole CIB in Hong Kong.
The NT dollar has fallen more than 10 percent against the greenback this year to underperform most of its Asian peers.
Trade data due tomorrow might reinforce the weakening trend. Taiwan’s export growth probably slowed to 10.5 percent last month on year from 14.2 percent in July, a Bloomberg survey of economists showed.
Export orders unexpectedly fell in July as demand from Chinese customers plunged, and officials have warned of further declines.
In another sign of weakness, Taiwan’s purchasing managers index last month declined to the lowest since May 2020 last month.
Stock outflows are another dampener, after global funds withdrew more than US$6 billion from Taiwan’s shares this quarter.
“Equity flows backdrop for the Taiwan dollar is likely to remain challenging with foreign investor positioning in Taiwan equities remaining relatively heavy, versus peers like [South] Korea, despite having been reduced since last year,” said Mayank Mishra, a global macro and currency strategist at Standard Chartered PLC in Singapore.
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