The New Taiwan dollar may advance to an 11-year high in six months as the central bank allows further gains to stem inflation, Goldman Sachs Group Inc said, raising its forecast for the currency.
The NT dollar may strengthen 6.3 percent to NT$28.5, the world’s biggest securities firm said, revising its earlier forecast of NT$30.50. The currency has advanced 6.4 percent in the past three months, the best among 10 most-active currencies in Asia outside Japan.
“The central bank will likely utilize currency appreciation as another policy tool in combating imported inflation,” Goldman’s research team led by London-based Jim O’Neill wrote in a monthly global report received by Bloomberg today. “The interest-rate differential vis-a-vis the US dollar has become more favorable.”
The NT dollar closed 0.2 percent stronger at NT$30.266 onshore against the US currency, according to Taipei Forex Inc. It touched NT$29.95 on March 26, the highest level since October 1997, a day before the central bank raised its benchmark interest rate by 12.5 basis points to 3.5 percent. A basis point is 0.01 percentage point.
Inflation may top a government target of 2 percent this year, the central bank said the same day in a statement, after increasing borrowing costs. Prices gained 3.96 percent in March from a revised 3.87 percent in February, the statistics bureau said on April 7.
Standard & Poor’s raised its debt-rating outlook for Taiwan to stable from negative on April 11, citing reduced risks of tension with China after the Chinese Nationalist Party (KMT) won the presidential election, pledging closer ties with China.
A stable outlook indicates S&P is more inclined to leave the current rating on Taiwan’s long-term foreign-currency debt at AA-, its fourth-highest.
President-elect Ma Ying-jeou (馬英九) pledged to begin easing travel and investment restrictions with China as soon as he takes office on May 20.
“With the overhang of political uncertainty now largely behind us, we expect the fundamental catalysts for the Taiwan dollar to move back into the driver’s seat,” the Goldman report said.
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