COST OF LIVING/U.S. dollar closes well above NT$31 on Fed expectations

09/16/2022 07:50 PM
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Taipei, Sept. 16 (CNA) The U.S. dollar continued its momentum against the Taiwan dollar Friday, hitting a more than three-year high against the local currency, on expectations that the United States Federal Reserve will continue to aggressively raise interest rates.

The U.S. dollar closed up NT$0.163 at NT$31.293, its highest level since Sept. 4, 2019, when the greenback ended at NT$31.365 against the Taiwan dollar.

The greenback attracted strong buying soon after the local forex market opened as investors rushed to pick up the currency, betting the Fed will act aggressively in a policymaking meeting scheduled for Sept. 20-21, dealers said.

The weakness of other regional currencies, including the Japanese yen, which fell to a new 24-year low, and the Chinese yuan, which breached the psychologically important 7-per-dollar level, added more downward pressure on the Taiwan dollar, dealers said.

Investors have been scrambling to move their funds out of Asia and into U.S. dollar-denominated assets to take advantage of their higher interest rate yields, leading to the depreciation of global currencies against the greenback.

Expectations that the Fed would raise interest rates even higher next week were fueled after a higher-than-expected August inflation report released Tuesday and a stronger-than-expected retail sales report for August released Thursday, dealers said.

For the week, the U.S. dollar rose NT$0.398 or 1.3 percent against the Taiwan dollar, the eight consecutive week of appreciation against the local currency.

Analysts' views

Taiwan's central bank appeared reluctant to intervene in the forex market to shore up the Taiwan dollar because it was unlikely it could reverse the tide amid a fund outflow, dealers said.

Some analysts believed that the U.S. dollar trading above the NT$31 level will become a new normal and that the greenback could challenge the NT$31.50 level soon.

Larry Wei (魏燦文), chairman of the Taiwan Association of Machinery Industry, said the U.S. dollar should rise further to above NT$32 to help Taiwanese machinery exporters stay competitive against their Japanese competitors, who have benefited from a weakening yen.

Compared with a more than 11.6 percent drop in the Taiwan dollar against the U.S. dollar so far this year, the yen has tumbled about 25.8 percent, and the yen's weakness has hurt Taiwanese machinery suppliers' competitiveness, according to the association.

(By Pan Tzu-yu, Chung Jung-feng and Frances Huang)

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