The New Taiwan dollar yesterday extended its winning streak, a day after it closed at the strongest level since 2011 amid speculation that the central bank would continue to loosen its grip on the rallying currency.
The advance builds on last month’s 1.4 percent gain, one of the largest for major currencies versus the US dollar.
While for months the central bank stepped in daily to limit appreciation, its relatively hands-off approach recently is a sign that officials might allow further strengthening.
Photo: Lee Ya-wen, Taipei Times
The gains also come amid signs of solid economic growth, with data from exports to manufacturing showing expansion in August.
The central bank allowing appreciation “is justified based on fundamentals and the currency is not overvalued,” Australia & New Zealand Banking Group Ltd head of Asia research Khoon Goh (吳昆) said. “There is room for further slight appreciation into year-end, though there will likely be increased volatility heading into the US election.”
The NT dollar has been among the least volatile major exchange rates for the past several months, even as foreign inflows into local technology stocks increased demand for the currency.
In Taipei trading yesterday, the NT dollar opened at NT$29 against the US dollar and moved to NT$28.71 before closing at NT$28.96, its strongest since September 2011, while the benchmark TAIEX advanced 1.24 percent to 12,704.23.
Central bank Governor Yang Chin-long (楊金龍) said on Sept. 17 that the NT dollar was “not strong” versus trade-weighted valuation metrics.
Taiwan Association of Machinery Industry (台灣機械公會) chairman Alex Ko (柯拔希) yesterday urged the central bank to take action to keep the NT dollar weak, warning that Taiwanese machinery exporters would lose their global competitiveness if it did not act.
“The exchange rate is the most painful for exporters,” Ko was quoted by local media as saying on the sidelines of a ceremony marking the forming of a Taiwan smart manufacturing alliance in Taipei.
“The NT dollar’s moving beyond 29.00 means all machinery manufacturers’ hard work will be in vain,” he said.
Taiwan Electrical and Electronic Manufacturers’ Association (台灣電子電機公會) chairman Richard Lee (李詩欽) said the exchange rate certainly affects exporters’ business, but it is not something that exporters have any control over.
Local manufacturers must try to innovate, as well as to increase gross margin, net profit margin and non-operating income, to offset the negative effects of the exchange rate, Lee said at the same event.
Additional reporting by staff writer
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