TAIPEI — The U.S. dollar rose against the Taiwan dollar Wednesday, gaining NT$0.044 to close at the day’s high of NT$29.845 after heavy foreign institutional selling prompted traders to lower their local currency positions, dealers said.
A falling South Korean won also prompted traders to boost their U.S. dollar holdings in the local foreign exchange, while lingering concerns over the debt problems in the eurozone kept traders wary after the Cyprus parliament voted against a tax on bank deposits required by the European Union in exchange for a bailout package, they said.
In the wake of the won’s weakness, the local central bank stepped in again to prop up the U.S. dollar in the late session to push the Taiwan dollar even lower at the end of the session, they added.
The greenback opened at NT$29.840, and moved to an early low of NT$29.750 before rebounding. Turnover totaled US$911 million during the trading session.
The capital flight from the local stock market caused by foreign institutional investors put downward pressure on the Taiwan dollar, which led traders to cut their positions in the local unit in exchange for the U.S. dollar, the dealers said.
Foreign institutional investors served as net sellers of NT$13.67 billion (US$458 million) worth of local shares as selling focused on large-cap stocks to send the weighted index 0.51-percent lower at the close.
The losses suffered by the stock market and the foreign exchange market reflected cautious sentiment toward the eurozone debt situation following the rejection of a tax levy by the Cypriot parliament that threw a planned EU bailout for the country into limbo, the dealers said.
Many traders here had fears that the controversy resulting from the bank deposit tax could plunge debt-ridden Cyprus into default and worsen the financial crisis in the region, they said.
Meanwhile, a weaker South Korean won, which fell to its lowest level since September amid fears that Seoul could tighten capital flow, prompted Taiwan’s central bank to place more pressure on the Taiwan dollar as the bank was reluctant to see the local currency left behind in the currency competition in the region, the dealers said.