The Taiwan dollar firmed on Friday, tracking gains in the yen after data showed Japan's consumer prices fell at a slower pace in April, although US dollar buying from insurers capped gains. The Taiwan dollar ended at T$33.239 to the US dollar, stronger than the previous close of T$33.298.
"In the afternoon the insurance firms appeared, eating into the Taiwan dollar's gains," said a Taipei dealer. Insurance firms have been remitting large amounts of funds outwards for investment overseas, pressuring the local currency.
The yen rose to 121.31 to the US dollar from 121.45 as investors reversed short positions in the yen on a sharp drop in regional markets. The Taiwan dollar often tracks the yen as Japan is the island's largest source of imports.
Volume on the main Taipei Forex Inc exchange was US $1.258 billion against US $1.472 billion in the previous session. Dealers said there was little impact from the government announcement on Thursday that first-quarter GDP growth hit 4.15 percent, slightly higher than expected. It also forecast annual growth at 4.38 percent, up from a previous estimate of 4.30 percent.
Dealers said they were still closely watching the central bank, which keeps the Taiwan dollar in a managed float regime. The central bank has been selling US dollars actively for more than a week, which helped limit the local currency's fall.
Some dealers noted that media reports, saying the government was considering major new regulatory controls to curb outflows from the island, had helped boost the Taiwan dollar. However, the securities and futures bureau under the Financial Supervisory Commission and the central bank denied the reports. On the smaller Cosmos exchange, the Taiwan dollar rose to T$33.260 to the US dollar from the previous close of T$33.306.