The central bank yesterday intervened the foreign exchange market to keep a lid on the surge of the Taiwan dollar in the wake of the devastating terriorist attacks in the US, dealers said.
NT dollar closed at NT$34.599 Taiwan dollars compared to Tuesday's close of NT$34.684.
"The currency opened sharply higher in the early trade as investors and depositors scrambled to cut their US dollar positions in anticipation of a weaker greenback following the attacks," said a dealer at a local bank.
"But the central bank later stepped in and spent some US$200 million to shore up the greenback in the last 15 minutes before closing," she added.
The central bank had earlier vowed to intervene if necessary to maintain currency stability after the destruction of the World Trade Center in New York Tuesday. Two hijacked airliners smashed into the twin towers and another was flown into the Pentagon in Washington.
"It is a long-standing policy of the central bank to intervene in the foreign exchange market to keep currency stability in the event of seasonal or accidental disruptions," said Chou A-ting, the bank's foreign exchange department director.
"And the overnight terrorist attacks in the US qualify as accidental disruptions," he added.
Although the stock market was closed following the US tragedy, the central bank reopened the exchange market at noon yesterday after a half-day suspension as international markets seemed to be functioning normally, Chou said.
The terrorist acts in the US were also expected to further depress Taiwan's waning economy, analysts said.
"After the attacks, private consumption in the US is likely to shrink further and it will lead to a sharper fall in its imports from Taiwan," said Bentham Hung, a fund manager of Fuh-Hwa Securities Investment and Trust.
The US, Taiwan's largest trading partner, imported US$34.81 billion worth of goods from the island last year, mostly information technology products.
Taiwan's top economic planning agency warned of an even slower economic recovery after the disruption of the financial system and a confidence crisis in the US, the Economic Daily News reported.
"US shares are likely to suffer heavy losses after the market reopens... and the disruption of financial orders will further delay the revival of the world's economy," an official of the Council for Economic Planning and Development, was quoted as saying.
Taiwan's economy this year may shrink more than the latest official forecast of a 0.37 percent contraction in the face of a further decline in US demand following the tragedy, said Hung.
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