The New Taiwan dollar yesterday surged more than 2 percent in another day of volatility for the currency, as exporters’ sales of the greenback tested the central bank’s tolerance for local currency strength.
The NT dollar jumped as much as 2.5 percent to NT$29.160 per US dollar yesterday in the biggest one-day gain since early May, after sliding more than 2 percent on Monday.
The latest move pushed the local currency’s gain this year to 12 percent, making it the best performer in Asia.
Photo: An Rong Xu, Bloomberg
Large foreign inflows and significant US dollar selling by local exporters were seen in the morning session, according to two traders, who asked not to be identified as they were not authorized to speak publicly.
State banks bought the greenback to smooth market liquidity, they said.
The local currency has been buffeted by a series of sharp swings since Friday last week, as the central bank stepped in to check its gains following the US dollar’s decline.
Authorities are eager to prevent a sharp appreciation to ease the pressure on life insurers after a jump in exports amid a trade dispute triggered a wave of repatriation by Taiwanese corporations.
“The Taiwan dollar has been under strong appreciation pressure due to record trade surpluses, equity inflows, and hedging activity by Taiwan life insurance companies,” Australia and New Zealand Banking Group Ltd head of Asia research Khoon Goh (吳昆) wrote in a note.
Since the central bank “strategically allowed” the NT dollar to rally in early May, it has been trying to manage the currency’s strength, he said.
Central bank Governor Yang Chin-long (楊金龍) played down the impact of local currency volatility at the last policy meeting on June 19. The monetary authority said it would continue to promote the “orderly operation of the foreign exchange market” — a line that indicated stability was one of its biggest concerns.
The surge in the local currency came as foreign investors snapped up local shares last month and exporters ramped up sales of the greenback amid concerns the US currency would keep falling. Repatriation of funds from Taiwan’s asset managers also played a role.
While the exact reasons behind the latest moves were unclear, the wild swings in the NT dollar over the past two trading sessions come as domestic firms — including life insurers and exporters — prepare to release their half-year financial reports. The sharp slide which helped the currency close lower on Monday would have helped local firms — many of which have taken a hit from the currency’s rally — to present better financial results.
“Window-dressing type of interventions are seasonal in nature and serve to pause, but not reverse the USD/TWD trend,” Malayan Banking Bhd senior strategist Fiona Lim said in Singapore. “As long as the broader US dollar decline continues, the sell-USD/TWD-on-rally trade could go on.”
The currency pair is expected to swing both ways as the NT dollar gets caught between speculation of central bank intervention and weakness in the greenback, she said.
INVESTOR RESILIENCE? An analyst said that despite near-term pressures, foreign investors tend to view NT dollar strength as a positive signal for valuation multiples Morgan Stanley has flagged a potential 10 percent revenue decline for Taiwan’s tech hardware sector this year, as a sharp appreciation of the New Taiwan dollar begins to dent the earnings power of major exporters. In what appears to be the first such warning from a major foreign brokerage, the US investment bank said the currency’s strength — fueled by foreign capital inflows and expectations of US interest rate cuts — is compressing profit margins for manufacturers with heavy exposure to US dollar-denominated revenues. The local currency has surged about 10 percent against the greenback over the past quarter and yesterday breached
MARKET FACTORS: Navitas Semiconductor Inc said that Powerchip is to take over from TSMC as its supplier of high-voltage gallium nitride chips Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) yesterday in a statement said that it would phase out its compound semiconductor gallium nitride (GaN) business over the next two years, citing market dynamics. The decision would not affect its financial targets announced previously, the world’s biggest contract chipmaker said. “We are working closely with our customers to ensure a smooth transition and remain committed to meeting their needs during this period,” it said. “Our focus continues to be on delivering sustained value to our partners and the market.” TSMC’s latest move came unexpectedly, as the chipmaker had said in its annual report that it has
SECURITY WARNING: The company possesses key 3-nanometer technology, and Taiwan should prevent it from being transferred to China, a lawmaker said The Ministry of Economic Affairs yesterday said it would conduct a “strict review” of any proposed acquisition of Taiwanese tech company Source Photonics Co (索爾思光電), following media reports that a Chinese firm was planning to buy the company in the Hsinchu Science Park (新竹科學園區). Local media reported that Suzhou Dongshan Precision Manufacturing Co (東山精密), China’s largest printed circuit board manufacturer, had announced plans to acquire Source Photonics for 5.9 billion yuan (US$823.1 million). The ministry said it has not received an application from Source Photonics and has formally notified the company that any buyout would constitute a change in its ownership structure. The
ELECTRONICS: Strong growth in cloud services and smart consumer electronics offset computing declines, helping the company to maintain sales momentum, Hon Hai said Hon Hai Precision Industry Co (鴻海精密) on Saturday announced that its sales for last month rose 10 percent year-on-year, driven by strong growth in cloud and networking products amid the ongoing artificial intelligence (AI) boom. The company, also known internationally as Foxconn Technology Group (富士康科技集團), reported consolidated sales of NT$540.24 billion (US$18.67 billion) for the month, the highest ever for the period, and a 10.09 percent increase from a year earlier, although it was down 12.26 percent from the previous month. Hon Hai, which is Apple Inc’s primary iPhone assembler and makes servers powered by Nvidia Corp’s AI accelerators, said its cloud
RSS