The Taiwan dollar dropped on Monday to its lowest close in more than eight months, unsettled by a stock market sell off and losses in emerging markets. The Taiwan dollar closed at T$32.343 to the US dollar, its weakest finish since January 28 and down 0.48 percent from its previous close of T$32.187. Foreign investors were net sellers.
Volume on the main Taipei Forex Inc exchange was moderate at $1.101 billion, up from $922 million in the previous session. Stocks tumbled globally on Monday as investor concerns grew that efforts by policy makers around the world may not be enough to prevent a recession.
"The Taiwan dollar was pressured by the drop in the stock market and a weakening Korean won," said a dealer at a local bank. "Foreign investors were also buying US dollars, but the amount wasn't large." Taiwan stocks dropped 4.12 percent on Monday to their lowest close in more than four years. Financial shares led the decline.
Foreign institutions sold a net T$13.6 billion ($420 million) worth of stocks and have been active sellers for the past few months. They have unloaded more than T$382 billion since June. The Korean won fell almost 5 percent to is and a half-year low against the US dollar, hit by a deepening shortage in foreign currencies. South Korean shares ended at a 21-month low.
In the non-deliverable forwards market, six-month NDFs narrowed to -0.220/-0.180 from -0.300/-0.250 the previous session, implying the Taiwan dollar will likely firm by a smaller degree in half a year.
The Taiwan dollar has fallen 7.7 percent on foreign fund outflows since hitting a 10-1/2-year high in late March, when investors anticipated improving cross-Strait relations under President Ma Ying-jeou. On the smaller Cosmos exchange, the Taiwan dollar fell to T$32.350 per US dollar from a previous close of T$32.190.