The China Post news staff
TAIPEI, Taiwan — The New Taiwan dollar fell back to close at NT$30.450 against the U.S. dollar on the foreign exchange market in Taipei yesterday after rising to a 12-year high of NT$29.890 during intraday trading. The Taiwan currency managed a minor gain of NT$0.15 on the U.S. dollar to reach the highest level in 28 months. Combined turnover at the two foreign exchange brokerage firms totaled US$1.323 billion in the trading session.
The local currency opened at the day’s low of NT$30.600 against the greenback then moved to a peak of NT$29.890 for a steep rise of NT$0.71 before falling back at the intervention of the Central Bank of the Republic of China (Taiwan). Foreign exchange dealers said the New Taiwan dollar was boosted by further inflows of foreign funds and that at one point it breached the NT$30.00 mark. They said the strength of the local currency reflected the strong recovery of Taiwan’s economy after the global financial meltdown in 2008-2009.
Strong domestic fundamentals, coupled with the spillover effect of the high liquidity in the United States market, have encouraged many foreign investors to move funds into Taiwan, the dealers said.
Foreign banks remained on the buying side to raise their New Taiwan dollar positions, betting that further appreciation of the local unit is inevitable amid ample liquidity, dealers said.
In late trade the central bank stepped in again to boost the value of the U.S. dollar to above NT$30.00 in a bid to reduce the impact of the New Taiwan dollar’s appreciation and protect Taiwan’s exports, dealers said.
As foreign funds keep flowing into the local market, the central bank’s efforts are unlikely to reverse the trend of a rising New Taiwan dollar but are expected to slow down the pace of the appreciation, dealers said.
They said the closing level of the New Taiwan dollar is expected to edge closer to NT$30.00 in the short term.
The U.S. dollar is expected to stay weak on the international market as the U.S. Federal Reserve has been striving to shore up the American economy and reduce the unemployment rate by measures like quantitative easing monetary policy. But the Federal Reserve move will continue introducing more hot money into the Asian market and increasing pressure on Taiwan’s currency. There is general anticipation that the central bank will continue allowing the local currency to rise during intraday trading but rein it in again by the end of the market in the hope of maintaining “dynamic stability” for the exchange rate. The Taiwan stock price index soared to the year’s high of 8,789.25 points, bolstered by the stocks in the sectors of construction and companies with property assets on the steep rise of Taiwan currency in mid-day trading. The index drifted lower to close at 8,740.43 for a minor gain of 3.84 points or 0.04 percent.