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Taiwan dollar gains 5.69% against US dollar in Year of Rat

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New Taiwan dollar (Pixabay photo)

New Taiwan dollar (Pixabay photo)

The Taiwan dollar appreciated 5.69 percent against the U.S. dollar to close at NT$28.390 on Tuesday (Feb. 9), the last trading session before the upcoming Lunar New Year holiday.

Compared with the closing level of NT$30.006 on Jan. 22, 2020, the last trading session of the Year of the Pig, the Taiwanese currency dollar continued to trend higher, up NT$1.616, or 5.69 percent, on the back of constant foreign fund inflows, at a time when the major central banks, in particular the U.S. Federal Reserve, kept pumping funds into the market to ease the economic impact of COVID-19.

The central bank said that it stepped into the local foreign exchange market to prop up the U.S. dollar and slow the pace of the Taiwan dollar's appreciation, as a stronger Taiwan dollar, which hit its highest level in more than 23 years, sparked an outcry among Taiwanese exporters.

The central bank said it intervened to stabilize the market because of "large and sudden capital flows that caused excessive volatility."

In recent trading sessions, where the U.S. dollar fell below the NT$28-mark at one point, the central bank entered the forex market in late trading to help the American currency recoup most of its earlier losses to close above NT$28.

Without such intervention, analysts said, the greenback would have fallen further against the Taiwan dollar.

On Friday, the Taiwan dollar rose to a low of NT$27.970 against the Taiwan dollar after opening at NT$28.200 before falling to its closing level, the lowest of the day.

Dealers said trading on Tuesday was light, as many traders were away for the Lunar New Year holiday.

In addition to its market intervention, the central bank has recently conducted a banking exam to crack down on speculation. On Sunday, the central bank announced that it had punished four foreign banks -- Deutsche Bank, ING Bank, Citibank, and the Australia and New Zealand Banking Group (ANZ) -- for helping grain companies to speculate in the forex market.

Dealers said that although the U.S. dollar index, which gauges the greenback's strength against the currencies of the six major trading partners of the U.S., has shown signs of strengthening, Washington has come up with a new round of massive stimulus measures with liquidity expected to stay ample, so it remains to be seen whether the greenback will become stronger in the longer term.


Updated : 2021-07-30 10:26 GMT+08:00