Taiwan dollar relatively stable, central bank says after fall

TAIWAN’S central bank said on Tuesday (Jan 16) that the exchange rate trend of the Taiwan dollar was relatively stable, after the currency hit its weakest in more than a month, which some traders blamed on post-election political uncertainty.

Taiwan’s ruling Democratic Progressive Party won Saturday’s presidential election but lost its parliamentary majority, which will make the new president’s job in passing legislation much harder. President-elect Lai Ching-te takes office on May 20.

The central bank said in a statement that the Japanese yen, South Korean won and Thai baht had all depreciated more against the US dollar so far this year than the Taiwanese currency.

“The exchange rate trend of the Taiwan dollar is still relatively stable,” it said.

Recent changes in the Taiwan dollar exchange rate reflect the strengthening US dollar’s trend internationally, the bank said, adding it will continue to pay close attention to funds’ inflows and outflows.

The bank sold US dollars on Tuesday to support the depreciating local currency and stabilise the market, three traders told Reuters.

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Eugene Tsai, head of the central bank’s foreign exchange department, confirmed the bank had intervened.

“Today, there was a large amount of foreign capital inflows, and there was an obvious imbalance between supply and demand, resulting in relatively large fluctuations in the exchange rate,” he told Reuters.

The Taiwan dollar on Tuesday weakened to its lowest point in more than a month, pressured, like other Asian currencies, by a stronger US dollar as investors continued to gauge the path of interest rates in the world’s largest economy.

But some traders also said investors were concerned about political uncertainty following Taiwan’s elections.

“Many uncertainties have caused ... risk aversion to heat up rapidly,” said one trader.

The central bank, known colloquially by traders in Taiwan as “the boss”, routinely intervenes in the case of large fluctuations to maintain order.

Taiwan stocks fell on Tuesday too, with the benchmark index closing down 1.1 per cent, also hitting a more than one month low. REUTERS