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Talk of the day -- Is George Soros behind latest NT$ rise?

2010/12/30 16:48:43

The Central Bank of the Republic of China (CBC) said in astatement Wednesday that a few foreign exchange banks have sold off alarge amount of US dollars on the local currency market at a specifictime in recent trading sessions, leading to market disorder and panictrading.

Initial investigations show that the money all came from severalspecific foreign investment institutions, the statement said, addingthat the CBC has transferred the results of its investigation to theFinancial Supervisory Commission (FSC) in hope of getting to thebottom of any behind-the-scenes currency speculation.

Banking sources said George Soros, one of the world's mostwell-known hedge fund managers, is widely believed to be themastermind behind the recent "vulture" attack on the New Taiwandollar.

The following are excerpts from the local media coverage of theissue:

United Daily News:

Foreign exchange banking sources said international "vulture"groups that have allegedly attacked Taiwan's currency in recent weekshave invariably remitted large amounts of U.S. dollars throughCitibank Taiwan and another large foreign bank's local branch.

The funds were immediately used to buy shares in the local stockexchange under the name of the two custodian banks to avoid CBCscrutiny, the sources said. The practice has allowed the realbeneficiaries to stay behind the scenes while engaging in speculativecurrency and stock trading.

On Dec. 27, the sources said, funds totaling US$500 million(about NT$15 billion) were dumped on the local foreign exchangemarket in two installments at 11 a.m. and 2: 30 p.m., respectively,driving the local unit up by over NT$1 during the session.

The two foreign banks used the same strategy to pump nearlyUS$300 million into the currency market again Dec. 29, leading theNew Taiwan dollar's exchange rate to hit a high of 29.375 against thegreenback at one point, up NT$1.021 from the previous day's level.

According to market sources, the local unit's recent dramaticfluctuations could be attributed to Soros' speculative tradingbecause inbound capital remittances have mostly come from Hong Kongsince his Quantum Fund set up a branch office there.

The CBC invited Citibank executives to a meeting earlier thisweek to get more information about the use of capital inflow.The CBC's statement underscored its determination to shield the NewTaiwan dollar from fluctuating too drastically due to speculativetrading, banking sources said. (Dec. 30, 2010).

Economic Daily News:

Although the New Taiwan dollar has tended to close above NT$30against the greenback in recent weeks because of the CBC'sintervention late in each trading session, the currency is likely toappreciate significantly after the New Year holiday, banking sourcesforecast.

The central bank has to keep the local currency from appreciatingtoo fast before the year's end to help local exporters secure betteraccounting reports. After the start of the new year, the sourcessaid, the CBC will have no reason to continue its late-sessioninterventions.

Against this backdrop, they predicted, the local currency mightfluctuate more drastically in the coming weeks. (Dec. 30, 2010).

(By Sofia Wu)