The New Taiwan dollar fell for a second day on speculation importers sold the currency to obtain U.S. dollars to settle month and year-end transactions.
Companies such as Chinese Petroleum Corp. and Formosa Petrochemical Corp. may be taking advantage of last week's biggest gain in almost 10 months in the island's currency to purchase dollars more cheaply.
"Importers are buying some U.S. dollars" after it weakened against the Taiwan dollar, said Pory Shih, a trader at Chang Hwa Commercial Bank. "They can get the U.S. dollar at a relatively cheap price now."
Taiwan's dollar fell 0.1 percent to close at NT$33.250 against its U.S. counterpart yesterday, compared with 33.187 yesterday, according to Taipei Forex Inc.
U.S. dollar firm ahead of holidays
Meanwhile, the U.S. dollar steadied against major currencies in Asian trade yesterday ahead of the Christmas holidays but dealers warned the U.S. currency could slip back depending on upcoming indicators.
The dollar rose to 116.66 yen by early afternoon from 116.13 yen in New York late Monday.
The euro slipped to US$1.1982 from US$1.2003 while rising to 139.76 yen from 139.41 yen.
Harry Ida, senior currency analyst at Thomson Financial's IFR Forex Watch, said the dollar still had a strong tone despite its sharp drop last week.
"The dollar has fallen sharply in recent sessions with players unwinding their long (buy) dollar positions but the market bias for (a stronger dollar) in the long-term remains unchanged," Ida said.
Koichiro Amaya, head of forex at BNP Paribas in Tokyo, said: "The excessive unwinding of yen short (sell)-positions is likely to be over as the dollar has pulled away from last week's sharp losses."
He said the market was quiet head of the holidays, meaning a small technical move could drive levels.