The Taiwan dollar rose on Tuesday as dealers squared off their long positions in the US currency and the central bank intervened lightly, a day after the local currency hit a 22-year closing low. The Taiwan dollar closed at T$35.095 to the US dollar, up from T$35.174 a day ago, which had been the lowest price since January 19, 1987, when the government set the daily rate at T$35.200 as part of its controlled currency system.
Volume on the main Taipei Forex Inc exchange was a moderate $957 million, lower than $1.02 billion a day earlier. "The US dollar eased off a little bit on Tuesday, and of course investors are squaring positions," said a dealer in Taipei.
In the non-deliverable forwards market, one-month NDFs were quoted at 0.055-0.085 to the US dollar, compared with 0.110/0.140 on Monday, indicating that the market sees the Taiwan dollar weakening by a lesser degree in the short term. The US dollar slipped on Tuesday as short-term speculators bought the euro and other higher-yielding currencies.
Further propping up the Taiwan dollar, Taiwan stocks rose 0.21 percent and exporters turned out in early trade, taking advantage of the rate to buy currency for cash needs at home. "Some exporters were selling US dollars at T$35.2, but there were others who were also waiting for a better rate," said another dealer.
Taiwan's central bank also intervened lightly in early trade by selling US dollars in the market to stem the recent weakening trend, dealers said. The central bank prefers the Taiwan currency to weaken at a gradual pace to maintain export competitiveness without compromising private investments.
Taiwan's Central Bank Governor Perng Fai-nan said the authority would ensure an orderly foreign exchange market if irregularities arise, in comments that also helped prop up the Taiwan dollar. The Taiwan currency has fallen 6.8 percent since the start of 2009 as a global economy hampered the island's exports and domestic consumption.
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