Taipei, Jan. 5 (CNA) The U.S. dollar fell below NT$28 against the Taiwan dollar at one point Tuesday but recovered most of the losses after the central bank apparently moved to slow down the appreciation of the local currency, dealers said.
The U.S. dollar closed at NT$28.402, after coming off a low of NT$27.973, a level that had not been seen since July 28, 1997, when the greenback ended at NT$27.972 against the Taiwan dollar.
The greenback opened at NT$28.250 amid massive downward pressure, as traders took cues from a plunge of the U.S. dollar index, which gauges the American unit's value against the currencies of Washington's six major trading partners, to its lowest level since April 2018, dealers said.
Selling in the U.S. dollar increased with an inflow of foreign funds on the spillover effects of the U.S. Federal Reserve's quantitative easing policies to mitigate the economic impact of the COVID-19 pandemic, dealers added.
A strong showing in the local equity market lent additional support to the Taiwan dollar, with foreign institutional investors buying a net NT$2.56 billion worth of shares on the main board, dealers said.
On Tuesday, the benchmark weighted index on the Taiwan Stock Exchange closed up 0.66 percent at a historical high of 15,000.03 points, after a 1.15 percent hike in the previous session.
On the forex market, the U.S. dollar continued to weaken until the central bank apparently entered the trade late in the session, as it reportedly has been doing recently to prop up the greenback, dealers said.
During the session, many Taiwanese exporters appeared to be in panic, as they rushed to dump their U.S. dollar holdings when they saw the currency falling below the NT$28 level in morning trade, dealers said.
In 2020, the U.S. dollar fell 5.6 percent against the Taiwan dollar, and dropped 0.37 percent in the first two trading sessions of 2021.
Dealers have forecast that the American currency will remain weak against the Taiwan dollar but the movement of the latter will depend on the central bank's actions.
On Dec. 16, 2020, Taiwan was listed among the economies that the U.S. would monitor for currency manipulation and was urged to allow its currency to appreciate, according to the U.S. Treasury Department's semi-annual Report on Macroeconomic and Foreign Exchange Policies of Major Trading Partners.
Taiwan's central bank governor Yang Chin-long (楊金龍) has said, however, that the bank is determined to stabilize the local forex market, which is more important than the U.S. Treasury's report.
The strength of the Taiwan dollar has spurred a call by old economy industries for the central bank to help push down the local currency to preserve Taiwan's global competitiveness.
On the other side of the argument, Ray Chou (周雨田), an adjunct research fellow at Academia Sinica's Institute of Economics, said Taiwan's industries should upgrade their technologies to mitigate the impact of a stronger Taiwan dollar, as they cannot always depend on low costs to maintain a high market share.
"The strength of the Taiwan dollar presents a good opportunity for industrial reform among Taiwanese exporters to boost their competitiveness," Chou said.
According to market analyst, contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC) is already out front in that regard, with its high-end technology development, which has allowed it to secure large orders, despite the appreciation of the Taiwan dollar.
https://focustaiwan.tw/business/202101050021
2021-01-05 12:48:00Z
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