U.S. dollar hits new 8-year high against Taiwan dollar

Taipei, July 20 (CNA) The U.S. dollar this week soared to a new high against the Taiwan dollar in eight years, breaching the NT$32.70 mark, in the wake of an exodus of foreign funds as well as a plunge on the local stock market, dealers have said.

On Friday, the greenback surged NT$0.125 or 0.38 percent to closed at NT$32.730 against the Taiwan dollar, the highest level since May 20, 2016, when the American unit ended at NT$32.752, after moving between NT$32.650 and NT$32.798.

According to the local central bank, the U.S. dollar index, which tracks the currencies of Washington's six major trading partners, rose 0.49 percent on Friday, sending ripples through the Asian currency markets.

As a result, the Japanese yen slid 0.67 percent and South Korean won shed 0.55 percent against the U.S. dollar, which placed downward pressure on the Taiwan dollar on Friday, dealers said.

Dealers said without intervention by the central bank, which bought the Taiwan dollar and sold the U.S. dollar, the greenback would have gained further on Friday.

Turnover totaled US$3.44 billion on Friday, the second highest this year, only trailing the US$3.53 billion recorded on Jan. 17.

This week, the U.S. currency rose NT$0.169 or 0.52 percent against the Taiwan dollar, marking the sixth consecutive week of appreciation, making the local currency the weakest in the Asian markets.

Since the beginning of this year, the U.S. dollar soared more than 6 percent against the Taiwan dollar.

Speaking with CNA, Chu Jung (儲蓉), chief risk control officer of Farglory Life Insurance Co., said foreign institutional investors intensified their efforts in dumping stocks in Taiwan recently and moved their funds out of the country, sending the Taiwan dollar lower.

On Friday, the Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), ended down 529.21 points or 2.26 percent at 22,869.26 after foreign institutional investors sold a net NT$64.36 billion worth of shares on the main board, the fifth largest amount in history, as they trimmed holdings in large cap electronics stocks amid volatility among tech stocks on the U.S. markets.

Contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock on the local market, plunged 3.48 percent to close at NT$970.00, marking the first time for the stock to end below the NT$1,000 mark since July 3, when the stock closed at NT$979.00.

Foreign institutional investors recorded a net sell of 38.01 million TSMC shares, the largest amount among the listed companies on the Taiex.

So far this month, foreign institutional investors have registered a net sell of NT$230.22 billion worth of shares on the local main board with market analysts attributing the sell-off to growing concerns over the upcoming U.S. presidential election slated for November.

Chu said that as the chance for the U.S. Federal Reserve to kick off a rate cut cycle in September is high and the local central bank is expected to leave its key interest rates unchanged then, the interest spread between the U.S. dollar and the Taiwan dollar will be narrowed to lend support to the local currency.

But Chu said the presidential vote in the United States is expected to continue to weigh in on the global financial markets and dictate the movement of the U.S. dollar.

In addition, dealers said investors had better keep alert over what the Bank of Japan will say in its policymaking meeting scheduled for the end of July as the signals sent by the Japanese central bank could move not only the yen but also other non-U.S. dollar currencies, including the Taiwan dollar.

Dealers added that the U.S. dollar is expected to fluctuate between NT$33.00 and NT$32.55 in the short term.