TAIPEI–The U.S. dollar fell against the New Taiwan dollar Friday, shedding NT$0.029 to close at the day’s high of NT$33.501 after an increase in the Chinese yuan’s reference rate sparked buying in regional currencies, dealers said.
Taiwan’s central bank entered the market, as it has done almost every session recently, to prop up the U.S. dollar and slow down the pace of the New Taiwan dollar’s appreciation in an attempt to protect the country’s exports, they said.
The greenback opened at NT$33.320, and moved to a low of NT$33.240 before rebounding. Turnover totaled US$619 million during the trading session. The U.S. dollar opened lower against the New Taiwan dollar as traders here pocketed gains on the greenback they built a day earlier.
Selling escalated on the People’s Bank of China’s (PBOC’s) decision to hike the yuan’s reference rate to the U.S. currency, dealers said.
It was the first time in nine sessions that the PBOC set a higher reference rate for the yuan, giving other regional currencies a breather.
On Thursday, the Chinese central bank cut the yuan’s reference rate by 0.5 percent to its lowest level since March 2011, which triggered selling not only in regional foreign exchange markets but also in equity markets.
Dealers said the yuan’s reference rate hike showed the PBOC’s intention to stabilize the Chinese currency and give comfort to currency traders and equity investors in the region for the moment.
That may be problematic in the future if the U.S. Federal Reserve continues to raise interest rates after kicking off an interest rate hike cycle in December, which could add downward pressure on non-U.S. dollar currencies, they said.
A slowing Chinese economy is also expected to place more selling pressure on the yuan and other regional currencies down the road, they said.
After witnessing the U.S. dollar fell below the NT$33.3 mark at one point, Taiwan’s central bank intervened and made its presence more visible late in the session to push the greenback back up to the 33.5 level at the close, dealers said.