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By Crystal Hsu
/ Staff reporter
The New Taiwan dollar weakened past NT$32 per US dollar yesterday for the first time in more than three months, while foreign-exchange reserves posted their steepest monthly decline since March, as a stronger greenback and capital outflows weighed on the local currency.
The NT dollar closed at NT$32.025 against the US dollar, down NT$0.095 from the previous session and marking a fourth straight daily loss. It was the weakest closing level since March 25, central bank data showed.
Exchange-rate movements across Asia have largely been driven by US dollar strength, the central bank’s Department of Foreign Exchange Director-General Eugene Tsai (蔡炯民) said, adding that the yen has weakened to about ￥162 per US dollar.
Photo: CNA
The US dollar’s recent advance reflects shifting expectations for US monetary policy following the US Federal Reserve’s June 17 meeting, as markets reassess the policy path amid efforts to return inflation to the 2 percent target, raising expectations of tighter financial conditions.
Tsai said global investors are redeploying funds in search of higher returns amid expectations that the US might tighten policy this year, while elevated valuations in the TAIEX are also weighing on capital inflows.
Tsai said he expects the Fed to keep interest rates unchanged this year, citing easing international crude oil prices — now back to levels seen before the Iran war — and weaker US employment data.
He made the remarks after the central bank released Taiwan’s foreign-exchange reserves data for last month, which decreased US$7.92 billion from a month earlier to US$597.15 billion.
Tsai attributed the decline to the stronger US dollar, which reduced the value of non-US dollar holdings, as well as central bank’s intervention to maintain orderly market conditions.
Despite the drop, Taiwan remained the world’s fourth-largest holder of foreign-exchange reserves, behind China, Japan and Switzerland, he said.
Foreign institutional investors were net sellers of about NT$580 billion in Taiwanese equities last month, adding to demand for US dollars, he said.
Central bank data showed that, profit and dividend remittances totaled about US$17 billion, contributing to a 1.5 percent depreciation of the NT dollar last month.
Tsai downplayed concerns that the July-August dividend season would trigger further NT dollar weakness, saying that major firms such as Taiwan Semiconductor Manufacturing Co (台積電) and MediaTek Inc (聯發科) distribute dividends in multiple installments, spreading out payment pressure.
Foreign investors do not necessarily repatriate dividend income, and might instead reinvest in the local stock market if they remain confident in returns, he said.
The NT dollar’s direction would continue to hinge on the US dollar’s trajectory and global equity markets, which influence exporter hedging behavior and foreign fund flows, he said.
Despite recent volatility, Taiwan’s strong export performance and solid economic fundamentals remain supportive of the currency, he added.
