New Tai­wan dollar falls more than S. Korean won

The China Post - - LOCAL -

Amid es­ca­lat­ing cur­rency de­pre­ci­a­tion in the re­gion, the New Tai­wan dollar fell more than the South Korean won this week as the lo­cal cen­tral bank wanted a cheaper cur­rency to pro­tect Tai­wanese ex­porters, statis­tics showed Satur­day.

In the week, the New Tai­wan dollar fell 0.62 per­cent from a week ear­lier to close at NT$31.226 against the U.S. dollar Fri­day, while the won dropped only 0.31 per­cent in the week to end at 1,114,63 won against the green­back.

Mar­ket an­a­lysts said that the losses suf­fered by the New Tai­wan dollar largely re­sulted from the lo­cal cen­tral bank’s in­ter­ven­tion to prop up the U.S. dollar to keep the lo­cal cur­rency’s value at lows at a time when Tai­wan’s ex­ports showed signs of weak­en­ing and many lo­cal busi­ness heavy­weights strongly urged the bank to send the lo­cal unit even lower.

In May, Tai­wan’s out­bound sales dropped 3.8 per­cent from a year ear­lier, mark­ing the fourth con­sec­u­tive month that a decline was reg­is­tered, as global de­mand for elec­tron­ics gad­gets fell.

Ac­cord­ing to Franklin Tem­ple­ton In­vest­ments, the weak­ness of the won re­sulted from fears that the out­break of Mid­dle East Re­s­pi­ra­tory Syn­drome Coro­n­avirus (MERS-CoV) in South Korea could im­pact the coun­try’s econ­omy. A move by the Bank of Korea to cut its key in­ter­est rates also sent the won lower.

As Taipei and Seoul com­pete with each other head to head in the global mar­ket, Tai­wan’s cen­tral bank is known to fol­low closely the won and step up with mea­sures to in­ter­vene in the New Tai­wan dollar’s value, when it sees a need to do so, an­a­lysts said.

Amid fears over pos­si­ble strong com­pe­ti­tion from South Korean ex­porters against their Tai­wanese coun­ter­parts, Tai­wan’s cen­tral bank made vis­i­ble ef­forts, in par­tic­u­lar in the late trad­ing ses­sion al­most ev­ery day re­cently to drag down the New Tai­wan dollar’s value, they said.

An­a­lysts said that since the U.S. Fed­eral Re­serve is ex­pected to kick off an in­ter­est rate hike cy­cle later this year, the U.S. dollar could be­come stronger against its ma­jor coun­ter­parts in the world, which could im­pose more down­ward pres­sure on the cur­ren­cies in the re­gion.

A stronger U.S. dollar is likely to ac­cel­er­ate the al­ready fierce cur­rency de­pre­ci­a­tion com­pe­ti­tion in the re­gion, an­a­lysts said, adding that re­gional cen­tral bankers are ex­pected to in­ter­vene to keep their cur­ren­cies cheaper.

In ad­di­tion to the New Tai­wan dollar and the won, other re­gional cur­ren­cies, such as the Chi­nese yuan, the In­dian ru­pee, the Malaysian ring­git, In­done­sian ru­piah and the Philip­pine peso, suf­fered losses against the U. S. dollar this week, the statis­tics showed.

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