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U.S. dollar closes higher on Taipei forex (update)

2012/05/16 18:27:50

Taipei, May 16 (CNA) The U.S. dollar rose against the Taiwan dollar Wednesday, gaining NT$0.121 to close at NT$29.635 as foreign institutional investors kept dumping local shares and moving funds off the island amid rising concerns over the debt crisis in theeurozone, dealers said.

Fears escalated over the debt situation in Greece after the debt-ridden country announced that it will hold new elections inJune after repeatedly failing to form a coalition government following a May 6 parliamentary vote, they said.

The greenback opened at NT$29.600 and moved between NT$29.520 and NT$29.637 before the close. Turnover totaled US$1.48 billion during the trading session.

The dealers said the announcement of new elections in Greece badly hurt market sentiment toward the financial problems in Europe, as the political standoff has created uncertainty for global financial markets.

They said traders at home and abroad were fearing that if Greece fails to solve its own debt problems, it is possible that the country might leave the eurozone, which could impact the already fragile economic fundamentals.

The euro fell to a four-month low against the U.S. dollar in reflection of the Greece concerns, prompting many traders to cut their holdings in the regional currencies, including the Taiwan dollar and the South Korean won, they added.

The dealers said many traders were keeping a keen eye on bond yield movements in other financially troubled European countries such as Spain after the market reacted negatively to the situation in Greece.

On the local foreign exchange market, foreign banks stood on the "sell" side, putting downward pressure on the Taiwan dollar, as foreign institutional investors were reluctant to take risks in the domestic stock market, the dealers said.

With large cap stocks in focus, the local bourse fell 2.17 percent to end at the day's low of 7,234.57 points after foreign institutional investors sold shares with a net worth of NT$11.79 billion (US$397 million).

The dealers said that as there have been few signs that market confidence in the financial situation in Europe will recover any time soon, the Taiwan dollar is likely to continue to trend lower against the U.S. dollar in the short term.

(By Kao Chao-fen and Frances Huang)