The Taiwan dollar continued its climb for a second day in thin Christmas Day trade bolstered by exporter deals, but its gains were kept in check by the central bank's intentions to slow the local currency's rise. The Taiwan dollar rose to an intraday high of T$32.939 to the US dollar on Thursday, but later pared some of those gains to close at T$33.030, stronger than Wednesday's close of T$33.045.
Volume on the Taipei Forex Inc exchange was thin at $547 million, well below the $810 million recorded the day before as investors stayed on the sidelines while major markets were closed for the holiday.
"Exporters were buying the Taiwan dollar, which is usual for this time of month, but the central bank stepped in when it rose above T$32.95," said a dealer in Taipei. "The central bank can't allow the Taiwan dollar to strengthen too much because this will only mean exports will become too expensive." A stronger Taiwan dollar would make exports from the island's many tech companies more expensive, driving down demand and further hurting their bottom lines, at a time when the companies are already reeling from the global slowdown.
The central bank, which keeps the Taiwan dollar in a managed float, sometimes intervenes in the currency market to prevent any massive fluctuations in the currency. Investors were also unwilling to build new positions as some of them had already squared off as the end of the year approached, dealers said. On the smaller Cosmos exchange, the Taiwan dollar strengthened to T$33.017 from Wednesday's close of T$33.038.