The NT dollar went up by as much as NT$0.17 against the greenback during intra-day trading yesterday, before the Central Bank of the Republic of China stepped in to bring the gains down to NT$0.13. The NT dollar closed at NT$31.89, the highest level in six weeks.
The upcoming negotiations between Taipei and Beijing on an economic cooperation framework agreement and a weak U.S. dollar both contributed to the gains, analysts said.
Bank executives said the central bank intends to defend a stable currency market as well as the country’s exports. It also wants to prevent international “hot money” from engaging in real estate and currency speculation on the island.
To check currency speculators, the central bank has requested that major Taiwan-based banks review their short positions on the U.S. dollar and refrain from trading non-delivery forward contracts, sources familiar with the issue revealed.
In response, bank executives said the central bank should pay more attention to foreign banks, as “they are the biggest players in the NDF market.”
These officials pointed out that the international currency markets are expecting a rally of the yuan against the U.S. dollar following remarks by Zhou Xiaochuan, governor of the People’s Bank of China, that the mainland currency would be adjusted in response to short-term economic changes. Vast amounts of international funds are still parked in Asia amid worries that the credit crisis in the European Union has not come to an end yet, they said.
Many forex traders expect the NT dollar to go further up to around NT$31.76, this year’s highest level reached on Jan. 14, if the central bank does not take stronger measures to check the local unit’s momentum.
However, other traders believe that the NT dollar will trade sideways at the NT$32 level in the short term as a weak currency is helpful to exporters. (SFC-HZW)