The New Taiwan dollar yesterday broke past the NT$28 mark to hit a 23-year high of NT$27.973 against the US dollar in intraday trading before retreating to close at US$28.402, dealers said.
The trend suggests the central bank might have difficulty holding the ground by buying US dollars in the last 15 minutes, a long-standing practice that has kept the local currency below the psychologically important level of NT$28.
The NT dollar opened at NT$28.25 and rose to NT$27.973 versus the greenback, buoyed by continued capital inflows that sent the TAIEX to close at a record-high of 15,000.03 points on turnover of NT$347.195 billion, central bank and Taiwan Stock Exchange data showed.
Foreign exchange trading reached a combined US$2.62 billion at the Taipei Foreign Exchange and Cosmos Foreign Exchange market, a nine-month high, as exporters zealously traded the US dollar for the local currency.
It is common for local firms to issue year-end bonuses ahead of the Lunar New Year, which falls on Feb. 12 this year, dealers said, adding that quantitative easing by US Federal Reserve contributed to the sell-off of the greenback.
The trend is particularly evident among Asian currencies — notably Taiwan, China and South Korea — given their economic resiliency, thanks to effective controls of COVID-19 infections, dealers said.
Like the TAIEX, the South Korean bourse repeatedly rallied to record highs and Chinese authorities raised the median exchange rate by 648 basis points to 6.476 yuan against the US currency to reflect reality, analysts said.
The global backdrop remains unfavorable for the greenback, adding appreciation pressure to the NT dollar moving forward, analysts said, adding that the local currency could challenge the NT$27.5 level later this quarter.
For the whole of last year, the NT dollar rose 5.6 percent against the US dollar, and gained another 0.37 percent in the first two sessions this year, central bank data showed.
The strength of the NT dollar has spurred a call by old economy industries for the central bank to intervene in the market to maintain their global competitiveness.
However, Ray Chou (周雨田), an adjunct research fellow at Academia Sinica’s Institute of Economics, said that Taiwanese industries should upgrade their technologies to mitigate the impact of a stronger currency, as they cannot always depend on low costs to maintain a higher market share.
“The strength of the New Taiwan dollar presents a good opportunity for industrial reform among Taiwanese exporters to boost their competitiveness,” Chou said.
Additional reporting by CNA
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