The Taiwan dollar fell to a five-month closing low on Friday as foreign funds flowed out of the market due to a globally stronger US dollar, despite central bank intervention. The Taiwan dollar hit an intraday low of T$30.220 during early trade, its lowest level since February 26, prompting the central bank to step in to prop up the local currency, dealers said.
It closed at T$30.090, its weakest finish since March 3, compared with T$30.870 in the previous session. Volume on the main Taipei Forex Inc exchange was hefty at $2.512 billion, rising from $1.185 billion a day earlier and the fifth highest level of all time.
"Foreign funds were pulling out because the US dollar has appreciated. And most other Asian currencies also fell," said a dealer at a local bank. Foreign institutions had been big sellers for the month of July, unloading more than T$110 billion ($3.5 billion), although they bought a net T$6 billion in the local bourse on Friday as the stock market rose 2.63 percent.
In the non-deliverable forwards market, six-month NDFs were quoted at -0.150/-0.100, narrower than -0.190/-0.140 in the previous session, indicating that investors saw the Taiwan dollar strengthening by a lesser degree in half a year.
Despite some intervention to keep the currency from falling too sharply, the central bank was not very active in the market, as it expects Taiwan's inflation to ease after oil prices fell, said another dealer in Taipei.
The central bank usually steps in the market because it prefers the Taiwan dollar to trend gradually to contain inflationary pressure while maintaining the island's exports competitiveness.
Despite losses in nine consecutive sessions, the Taiwan dollar is still up 4.2 percent since the beginning of the year as the central bank intervened and investors bet on positive economic prospects under the China-friendly President Ma Ying-jeou. On the smaller Cosmos exchange, the Taiwan dollar closed down to T$31.140 to the US dollar from the previous close of T$30.888.
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