NT dollar down again on pessimistic forecast

By Sandra Chuang, The China Post

The NT dollar yesterday slid to a new 15-days low against the U.S. dollar as rumors saying a further currency depreciation seemly inevitable heightened market pessimism.

The exchange rate dropped NT$0.312 to close at NT$34.377 to the U.S. dollar, while the daily turnover expanded dramatically from US$273 million to US$629.5 million. The market opened higher at NT$34.025 against the greenback but breached the psychological barrier of NT$34.2 within two hours due to reports that GDP growth will turn out much weaker than the government forecast. At the end of the morning session, the NT dollar closed at NT$34.235 against the U.S. dollar, down NT$0.17 from Tuesday’s close, while the half-day trading volumes expanded to US$439 million. Market observers said the speculation was set off by remarks made by foreign investment houses that this year’s GDP figures will drop to 2.91 percent, much lower than the official forecast of around 5 percent.

In addition to the negative economic data, the comments by Peter Kurz, chairman of Mr. Taiwan.com, was also wildly cited by the local media as he predicted that the local currency will have room for further depreciation within three months.

Market analyst also said the Central Bank of China is apparently refraining from strong intervention. “The already weak currency was facing heavy pressure after these reports, but the central bank seemly took its hand off against the massive greenback demand from the banks,” a local dealer said.

The aggressive buying of non-delivery forward (NDF) contracts for the greenback continued to drag down the local currency for the rest of the session.

The NT dollar was traded between NT$34.44 and NT$34.009 yesterday.