The central bank yesterday lowered key interest rates for the second time this month following a bigger move by its US counterpart overnight, citing concern over an increasingly gloomy economic picture at home.
The rate cut, the third of its kind since Sept. 26 and declared before the start of equities trade, effectively boosted investors’ confidence as the TAIEX and New Taiwan dollar both staged a strong rebound.
In yet another unscheduled news conference early yesterday morning, central bank Governor Perng Fai-nan (彭淮南) said the bank’s board decided to reduce the discount rate, the rate on accommodations with collateral and the rate on accommodations without collateral by 25 basis points each to 3 percent, 3.375 percent and 5.25 percent respectively.
The new rates would take effect immediately, the top monetary regulator said, adding that dwindling economic activity prompted the central bank to make the adjustments.
“The rate cut is expected to help spur economic growth,” Perng said. “The downside risks loom larger as evidenced by falling exports as well as industrial output and rising jobless rates.”
The unemployment rate hit a four-year high of 4.27 percent last month, up 0.13 percentage points from August, defying a seasonal drop in unemployment normally seen at the end of summer. Exports, in the meantime, declined by 1.6 percent for the first time in six-and-half years as the US financial crisis threatened to plunge the world economy into recession.
Perng said that the rate cut would not fuel inflationary pressures as consumer price growth had slowed for two straight months and was expected to decrease further for the rest of the year.
On the back of the rate cut news, the stock market shot up 277.12 points, or 6.28 percent, to close at 4,683.14 yesterday, on turnover of NT$67.7 billion (US$2.06 billion).
Foreign funds, which have been steadily pulling out of Asian markets in the wake of the credit crunch, bought a net NT$735 million in local shares, the Taiwan Stock Exchange’s data showed.
Likewise, the local currency picked up 1.5 percent, or NT$0.496, to close at NT$32.799 against the greenback yesterday on turnover of NT$3.892 billion, the third largest in foreign exchange history.
Trading was valued at US$3.32 billion on the Taipei Forex Inc and US$563 million on the smaller Cosmos Foreign Exchange, data from the two companies showed.
A trader at the Union Bank of Taiwan (聯邦銀行) attributed the rise in the NT dollar to technically weakening demand for the US dollar across the board, and said the trend would not last long.
Shares in Taiwan closed at a new high yesterday, the first trading day of the new year, as contract chipmaker Taiwan Semiconductor Manufacturing Co (TSMC, 台積電) continued to break records amid an artificial intelligence (AI) boom, dealers said. The TAIEX closed up 386.21 points, or 1.33 percent, at 29,349.81, with turnover totaling NT$648.844 billion (US$20.65 billion). “Judging from a stronger Taiwan dollar against the US dollar, I think foreign institutional investors returned from the holidays and brought funds into the local market,” Concord Securities Co (康和證券) analyst Kerry Huang (黃志祺) said. “Foreign investors just rebuilt their positions with TSMC as their top target,
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