The New Taiwan dollar dropped as low as NT$35.2 against the US dollar in trading yesterday before ending the day at NT$34.916, its lowest level since July 23.
The fall came after the Japanese yen sank to 129.5 against US dollar yesterday morning.
One foreign-exchange dealer said the NT dollar had reached its near-term low and would probably remain stable for the time being.
"The latest NT dollar depreciation is likely to stop at NT$35 to NT$35.10 against US dollar in the near term," a senior foreign exchange dealer at a European bank told the Taipei Times.
"It's clear that the Central Bank of China intentionally let the NT dollar fall to the level we saw," the dealer, who did not want to be named, said.
Once the NT$35 level is reached, it could hold for as long as three months, he said. The next is thing to watch is the reaction of other Asian currencies.
Another dealer said large overseas remittances by foreign investors hurt the NT dollar.
"Yesterday's significant outflow of foreign institutional investors contributed to the depreciation," said a foreign exchange dealer at a US bank who requested anonymity.
But one researcher said the NT dollar's depreciation may not be all bad for the economy.
"A certain degree of depreciation of the NT dollar could help Taiwan's economy," said Wang Li-jung (
"Assuming [other regional] currencies do not depreciate, except the Japanese yen, if the NT dollar falls to NT$36 against the US dollar it would not significantly hurt the economy and it could help exports," Wang said.
How far the yen will drop is a big question.
"The first [depreciation] target of ?130 has been reached. Now the question is whether it will go to ?140. Asian nations will not want to see that happen," one dealer said.
"If the Japanese economy deteriorates further, it's possible that the yen could depreciate to 140," Liu Da-nien (劉大年), also at Chung-Hua, said at a seminar yesterday.
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