The Taiwan dollar fell for a fifth straight session to a 2-1/2-month low on Monday as more foreign funds left the island with the stock market persistently on a down trend. The Taiwan dollar had weakened to T$30.705 to the US dollar by 0144 GMT from the previous close of T$30.645.
The local currency hit as low as T$30.726 during trade, the weakest level since May 16. Despite recent declines, the Taiwan dollar still gained about 5.4 percent since the beginning of the year as the market bet on improving economic prospects under China-friendly President Ma Ying-jeou. Volume on the main Taipei Forex Inc was active at $280 million after 45 minutes of trade, higher than $269 million during the same period on Friday.
"Foreign banks have been buying US dollars and we still see that going on today," said a dealer in Taipei. "The central bank was in the market too, but it wasn't very active. Taiwan's stocks fell by 0.3 percent on Monday. Foreign funds have been active net sellers over the past month, unloading a huge net T$110 billion ($3.6 billion) in July, pressuring the Taiwan dollar.
The central bank usually buys and sells US dollars in the main Taipei Forex Inc exchange to ensure the Taiwan currency trends higher gradually to curb imported inflation without compromising export competitiveness. Investors also covered some of their short positions in the US dollar in the non-deliverable forwards (NDFs) market. Six-month NDFs were quoted at -0.240/-0.190 to the US dollar, compared with -0.230/-0.180 in the previous session, meaning that the market saw the Taiwan dollar firming by a lesser degree in half a year.
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