Taiwan dollar set to weaken past NT$30 against greenback

Taipei, April 6 (CNA) The Taiwan dollar is likely to weaken past 30 to the U.S. dollar after the April 4-7 Tomb Sweeping Festival holiday ends because of weakness in the Japanese yen, market analysts said Saturday. Norman Yin, an economics professor at National Chengchi University, said a recent plunge in the yen reflected the Bank of Japan's new liquidity easing measures. The Japanese central bank announced Thursday that it intended to increase its bond purchases to 7.5 trillion yen (US$77 billion) a month, far beyond the 5.2 trillion yen expected by the market, and double the country's monetary base. The BOJ's policy drove down the value of the yen to a level of 97.83 against the U.S. dollar at one point Friday, the weakest since June 2009, while Taiwan's foreign exchange market was closed for the holiday. On Wednesday, the last trading day ahead of the holiday, the Taiwan dollar closed at NT$29.925 against the U.S. dollar, weakening from NT$29.920 a day earlier. Yin said most Asian currencies have engaged in competitive devaluation recently to keep their exports competitively priced in foreign markets, and the yen's plunge meant that other regional currencies would likely follow suit. Because of Japan's aggressive quantitative easing measures, the yen is likely to test the 100 mark against the greenback and trigger the further depreciation of regional currencies, Yin predicted. Escalating tensions in the Korean Peninsula could also roil currency markets, Yin said. North Korea's threats of war have already dragged down the value of the South Korean won, which could put downward pressure on other regional currencies, he said. Facing these market pressures, the Taiwan dollar should weaken past the NT$30.00 mark, Yin said, and he advised investors to pay close attention to how far above NT$30.00 the U.S. dollar will go. Since the beginning of this year, the Taiwan dollar has fallen 2.51 percent, the won has lost 4.32 percent, and the Japanese yen has dropped about 8 percent against the U.S. dollar. A dealer with a European bank operating in Taiwan said he expected the pace of the Taiwan dollar's depreciation to accelerate and test the NT$30.00 mark Monday, the first trading day after the holiday. Dealers said Taiwan's central bank might even intervene to speed up the local currency's depreciation, because the bank is reluctant to allow the Taiwan dollar to lag behind in the ongoing regional currency war. (By Kao Chao-fen and Frances Huang)