The Taiwan dollar ended flat on Friday as US dollar sales by foreign institutions and exporters were offset by the central bank's intervention. The Taiwan dollar ended at T$30.382 to the US dollar, nearly flat from the previous close of T$30.380. Volume on the main Taipei Forex Inc exchange was $967 million, lower than $975 million a day earlier.
"Foreign institutions have been selling US dollars," said a dealer in Taipei. "We're expecting the central bank to raise interest rates next week, but the impact will be limited if they lift by 12.5 basis points, since it's already factored into the market."
The central bank is due to hold its quarterly meeting on monetary policy next Thursday, when most dealers are expecting another 12.5 basis points rise in the main policy rate, which is at a 6-1/2-year high of 3.5 percent.
Exporters typically get rid of their US dollars at the end of the month to satisfy their cash needs at home. Foreign institutions also conducted some inflows. Dealers said there was still some caution in the market after the central bank called several banks earlier this week to inquire about their US dollar sales, prompting many dealers to trim their short positions in the US dollar. The central bank bought some US dollars throughout the session, together with oil-related companies who need the US currency for their imports.
The Taiwan dollar has gained 6.4 percent since the beginning of the year on better economic prospects after President Ma Ying-jeou took office as his administration is keen on boosting the island's economy by improving ties with China. On the smaller Cosmos exchange, the Taiwan dollar traded at T$30.377 to the US dollar, little changed from the previous close of T$30.375.
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