New Taiwan dollar falls more than S. Korean won
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.