Despite strong market expectation of gradual gains in the New Taiwan dollar, the currency yesterday declined by NT$0.079 to close at NT$33.179 against the US dollar on the Taipei foreign exchange market.
But market watchers believe that there is still room for the NT dollar to gain.
"It's likely that the NT dollar may continue to climb and break through the NT$33 level by the end of this month," said Yang Kung-yi (
Local exporters yesterday rushed to dump the US dollar while foreign investors stepped in to overbuy the local currency by NT$8.7 billion, triggering a roller-coaster fluctuation in the foreign exchange market, Yang said.
But another currency trader, who refused to be identified, said the NT dollar may remain stable before the presidential election as the Japanese yen also stabilizes.
The inflow of hot money, as a result of overseas investors' optimism in Asian stock performance, will build up pressures for the NT dollar to strengthen, Yang said.
The NT dollar yesterday pared a decline of as much as 0.7 percent after central bank Governor Perng Fai-nan (彭淮南) told lawmakers that stability in the currency will be maintained, while suggesting exporters buy forward contracts on the NT dollar to hedge future exchange risk.
Speaking at the legislature's Finance Committee, Perng said that the NT dollar's recent appreciation has outdone other Asian currencies including the yen and Korean won.
The NT dollar has gained 2.99 percent from a year earlier to close at NT$33.978 against the US dollar at the end of last year, Perng said. By last Friday, the NT dollar had gained another 2.56 percent to close at NT$33.13, he noted.
People First Party Legislator Thomas Lee (
Perng agreed, saying that the bank's stance is to disallow any in-and-out flow of short-term capital, or so-called hot money, to disturb the foreign-exchange market's stability. He also vowed to adhere to market principles.
"Should any irregular factors disturb the market, the central bank is ready to step into the market to maintain the dynamic stability of the exchange rate," Perng said.
The bank recently detected and corrected a high-tech firm, which used past invoices to purchase foreign-exchange forwards, he said.
According to Perng, as of Tuesday, the inflow of foreign capital has reached US$71 billion, amounting to 14.62 percent of the stock market.
Perng added that he believes foreign investors are more interested in speculating on the up to 7 percent daily fluctuation on the stock market than the foreign-exchange market, which he said is relatively stable.
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