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New Taiwan Dollar depreciates quickly amid economic uncertainty in Spain and Italy

Political crises in Europe are causing currencies in emerging economies to fluctuate

(photo courtesy of Pixabay user tw19831113)

(photo courtesy of Pixabay user tw19831113)

TAIPEI (Taiwan News)— As the United States dollar continues to rise, the exchange rate of the New Taiwan Dollar against the US dollar was NT$30.010 on May 30, a depreciation of 2.20 points, reaching a low not seen since last December.

One cause for the decline are political risks in Italy and Spain which continue to cause fluctuating markets, increasing the strength of the dollar.

According to the Central News Agency (CNA), foreign exchange traders pointed out that the recent increase in political risk in the European Union (EU) has caused political uncertainty in Italy, triggering concerns that Italy may withdraw from the eurozone.

Likewise, Spain is also facing a political crisis, contributing to the Euro’s devaluation against the US dollar by 1.16 points, the lowest since last November.

Foreign exchange traders also have said that international funds are pouring more into the US dollar and the Japanese yen to hedge their risks. The currencies of the emerging markets, such as the Korean won, have been devalued even further.

The New Taiwan dollar has also followed similar depreciation. However, after the New Taiwan dollar opened at NT$30 today, the willingness of exporters to engage in foreign exchange has increased, especially at the end of the month. The power to channel foreign exchange will be greater, which is expected to ease the depreciation of the New Taiwan dollar.

Italy is the third largest economy in the Eurozone, second only to Germany and France. Because Sergio Mattarella, the President of Italy, strongly rejected Euro-skeptic Paolo Savona as the finance minister, the chancellor had stepped down, resulting in the formation of a coalition government of the anti-establishment Five Star Movement and the far-right Coalition League.

Mattarella has now asked former International Monetary Fund (IMF) official Carlo Cottarelli to be the interim prime minister, who has supported the technocratic government and is likely up for re-election in the fall elections. In addition the populist parties have failed to form a government.

In addition to Italy, Spain has its own crisis brewing. As 29 people linked to the political party (People’s Party) of the Prime Minister was convicted last week of influence-peddling and falsifying accounts along with a drawn-out corruption trail.

Prime Minister Mariano Rajoy is facing a confidence vote this Friday, according to CNBC. In the wake of the convictions and the vote, opposition parties are taking advantage of the situation.

Updated : 2022-05-26 16:55 GMT+08:00