The Taiwan dollar weakened to a 6-1/2 month low on Friday due to foreign fund outflows as the stock market fell steeply, although the central bank and exporters bought the currency. The Taiwan dollar dipped as low as T$31.908 to the US dollar shortly after the opening bell, the weakest intraday level since February 13.
It closed at T$31.875, its lowest finish since February 12, weakening from T$31.761 a day earlier. Volume on the main Taipei Forex Inc exchange was $1.23 billion, up from Thursday's $1.071 billion. "There were foreign fund outflows as the local stock market fell. But the amount wasn't as much as those in the previous sessions," said a dealer at a local bank.
On Friday, Taiwan stocks dropped for a fifth straight day, down 1.64 percent, to their lowest finish in more than two years. The fall followed a Wall Street tumble and came as Taiwan's export-driven tech firms worried about the economic slowdown in the United States.
Foreign institutions sold a net T$15 billion ($471 million) of stocks, and have been selling more than T$304 billion since June. Dealers said oil traders and exporters were both seen in the market, and the central bank stepped in to prevent the Taiwan dollar from falling and protect export competitiveness.
Exporters prefer a weaker local currency so they can convert their US dollar earnings into more Taiwan dollars. The Taiwan dollar has so far lost about 6 percent, since hitting a 10-1/2-year high of T$30 in late March, due to persistent foreign fund outflows as global economic worries hit the stock market.
In the non-deliverable forwards market, six-month NDFs were quoted at -0.180/-0.130, narrower than -0.220/-0.180 in the previous session, implying that investors saw the Taiwan dollar firming by a lesser degree in half a year. On the smaller Cosmos exchange, the Taiwan dollar weakened to T$31.903 to the US dollar from the previous close of T$31.795.