The New Taiwan dollar weakened for the second straight day against the greenback after central bank intervention and rising demand for US dollars, but the price adjustment is soon to end, dealers said yesterday.
The NT dollar shed 0.99 percent, or NT$0.331, to trade at NT$33.90 against its US counterpart at the 4pm close, data from Taipei Forex Inc showed. It opened at NT$33.95, rose to NT$33.79 and then sank to NT$34 during the trading session. The local currency had waned NT$0.31 on Tuesday, for a loss of NT$0.65 in the last two days.
A dealer from a local bank attributed the latest wave of depreciation to central bank intervention.
“The monetary regulator has led the buying of US dollars for two days to warn traders not to speculate on the local currency,” the dealer said by telephone on condition of anonymity. “Speculation was responsible for a strong NT dollar [previous to the intervention].”
Turnover was US$1.154 billion on Taipei Forex and US$567 million on the smaller Cosmos Foreign Exchange, US$1.721 billion in total, statistics from the two companies showed.
In a brief statement, the central bank said the local currency was relatively stable when compared with the South Korean won. It said the NT dollar’s 0.99 percent fall against the greenback yesterday compared with a drop of 2.36 percent in the South Korean won.
The dealer said room for the NT dollar to weaken further was limited in the short term and that the currency was likely to hover around the NT$34 level.
“We’ll probably not see big fluctuations in the value of the NT dollar in the coming weeks,” the dealer said.
Another dealer agreed that the depreciation would soon come to an end, as the central bank appears to want to keep the currency in a range between NT$33.50 and NT$34.
“The foreign exchange market is likely to remain calm for the rest of this month,” the trader said.
The recent weakness came as global funds cut their holdings of local shares by NT$10.2 billion (US$301 million). Shares slumped globally after investors, including George Soros, said a rally over the last four weeks was unsustainable.
“There’s a clear heightening of risk aversion as equities in the US and Asia both declined,” said Dariusz Kowalczyk, chief investment strategist at SJS Markets Ltd in Hong Kong. “We are seeing increased volatility in Taiwan’s dollar because the market data continues to be weak.”
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