Taiwan Dollar Posts Weekly Drop Amid Intervention SpeculationJustina Lee
Currency gains this year threaten island’s exports, economy
Equity inflows this week poised to be smallest in six weeks
Taiwan’s dollar posted its biggest weekly drop since March on speculation the central bank may step up intervention amid slowing equity inflows.
The Taiex index retreated 1.3 percent this week after foreigners’ net purchases of local shares totaled $362 million as of Thursday, poised for the smallest inflow in six weeks. Speculation that the central bank could intervene to curb appreciation has mounted as the exchange rate’s 4.1 percent gain this year threatens to stifle a tentative recovery in exports, a key driver of the island’s economy.
The central bank “pushed down the Taiwan dollar” this week, said Samson Tu, a fund manager at Uni-President Assets Management Corp. in Taipei. “If exports aren’t good, the economy generally won’t be good.”
Taiwan’s outbound shipments, which account for about 70 percent of the island’s gross domestic product, climbed in July for the first time in 18 months. The local currency has depreciated 0.7 percent against the greenback this week and closed at NT$31.618 a dollar, Taipei Forex Inc. prices show. The Taiex fell 1 percent on Friday, the most since July 29.
Foreign investors made dollar purchases on Friday, according to two traders who asked not to be identified because they’re not authorized to speak publicly. Global funds sold a net $122 million of local shares on Friday, preliminary data show.
Taiwan’s economy grew 0.7 percent in the April-June period, matching the median estimate in a Bloomberg survey of analysts, data showed on Friday.
Government bonds rose this week, with the 10-year yield slipping four basis points to 0.63 percent, near a record low, according to Taipei Exchange prices.