Greenback closes higher as traders seek haven


TAIPEI — The U.S. dollar rose against the Taiwan dollar yesterday, gaining NT$0.07 to close at NT$29.630 as traders moved more funds into the greenback as a safe haven amid rising concerns over the debt problems in Greece, dealers said.

A plunge in the local bourse also placed downward pressure on the Taiwan dollar throughout the trading session amid gloomy sentiment toward the economic fundamentals at home and abroad, they said.

The U.S. unit opened at NT$29.660 and moved between NT$29.595 and NT$29.670 before the close. Turnover totaled US$914 million during the trading session.

A weakening euro, which hit a four-month low against the U.S. dollar, gave a strong indication to local traders that they should cut their Taiwan dollar holdings and raise their greenback positions as Fitch downgraded Greece’s long-term credit rating to CCC from B-minus amid concerns over the country’s debt crisis, the dealers said.

Fitch’s downgrade came as political parties in Greece launched a campaign for new elections after the country failed to form a coalition government following a May 6 parliamentary vote.

The credit rating agency voiced concern that Greece might have to leave the eurozone, prompting many traders to become more pessimistic about the country’s future as well as toward the outlook for global financial markets, the dealers said.

Massive bank withdrawals by depositors in Greece also hit market confidence in that country’s ability to deal with its debt problems, which further dragged down the euro, they said.

Foreign banks served as the major buyers of the U.S. dollar soon after the local foreign exchange market opened, and selling on the local bourse further boosted demand for the greenback throughout the session, the dealers added.

The weighted index closed down 2.79 percent at 7,151.19 points after foreign institutional investors sold a net worth of NT$13.41 billion in local shares.

The U.S. dollar was expected to trend higher against the Taiwan dollar in the short term, as there were few signs that the debt situation in Europe will subside any time soon, the dealers said.