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

2012/09/14 18:00:52

Taipei, Sept. 14 (CNA) The U.S. dollar fell against the Taiwan dollar Friday, shedding NT$0.23 to close at NT$29.469, the lowest level since May 11, when the greenback ended at NT$29.410, on further fund inflows, dealers said.

Foreign investors kept moving funds into the local market after the U.S. Fed Reserve announced overnight plans to spend US$40 billion to buy mortgage-backed securities as further stimulus measures, known as a third round of quantitative easing (QE3), they said.

A rally in the local bourse on the back of strong foreign institutional buying also added downward pressure on the greenback against the local currency throughout the session, they added.

The U.S. dollar opened at the day's high of NT$29.700, and moved to an early low of NT$29.375 before rebounding. Turnover totaled US$1.05 billion during the trading session.

Soon after the local foreign exchange market opened, foreign banks and local exporters rushed to dump their U.S. dollars in exchange for Taiwan dollars on expectations that the Fed's latest stimulus measures will make liquidity spread into Asia and further lift the regional currencies, dealers said.

Along with the current "operation twist" program in which the Fed buys long-term bonds but sells short-term bonds to keep long-term interest rate lows, the central bank is expected to pump US$85 billion into the market a month to boost the economy.

Traders were betting that regional currencies, including the Taiwan dollar and the South Korean won, will appreciate further on more fund inflows into the region, dealers said. The won hit a six-month high against the greenback after the QE3 launch.

Due to the Fed's further liquidity easing measures, investors in the local bourse became more willing to take risks by picking up stocks to boost the weighted index on the Taiwan Stock Exchange by 2.10 percent, dealers said.

Foreign institutional investors served as net buyers of NT$15.77 billion (US$535 million) to boost demand for the Taiwan dollar, they said.

The local central bank intervened again to slow down the pace of the Taiwan dollar's appreciation to strengthen the island's global competitiveness after the U.S. dollar fell below the NT$29.40 mark during the session.

(By Kao Chao-fen and Frances Huang)