New Taiwan dollar gains with yuan against greenback

The New Taiwan dollar rose NT$0.145 to close at NT$30.348 against the greenback, also on optimism after Germany and France pledged to unveil a plan to recapitalize banks to take on the debt problems in the eurozone.

The improved sentiment boosted the euro against the greenback, while a stronger euro bolstered most of the currencies in the Asian region right after the markets opened, foreign exchange dealers said in Taipei.

The strength of the currencies in Asia also reflected a strong showing in the stock markets as foreign institutional investors resumed buying since they felt relieved by the promises by Germany and France, the largest two creditors in Europe, they added.

Turnover totaled US$888 million during the trading session in the Taipei foreign exchange market.

The U.S. unit opened at the day's high of NT$30.490 but moved to a low of NT$30.290.

The dealers said the market has been paying closer attention to the U.S. Senate's imminent vote on the Currency Exchange Rate Oversight Reform Act of 2011.

The bill, targeted mainly at China's so-called “currency manipulation,” is thought to have played a part for the recent surges of the renminbi (RMB) against the U.S. dollar while Beijing officials continued criticizing the proposed act.

Beijing Warning

Chinese officials repeated a warning that the bill, if passed, will only bring a new “trade war” between China and the U.S. to further dampen the world economy.

Beijing leaders were seen to have adopted a policy, at least for now, to allow the RMB to continue rising. The mainland currency once surpassed the level of 6.35 yuan to touch 6.3483 yuan, the highest since the Chinese forex reforms in July 2005.

The South Korean won attracted buying to extend its strength and led its counterparts in the region to move higher against the greenback, the dealers said.

The euro rose to an almost-three-week high against the U.S. dollar overnight on the back of the upbeat market mood created by the pledges of German and French leaders over the weekend to make new effort to resolve the European debt crisis.

The two major economic powers in Europe said they will announce a plan at a forthcoming G-20 meeting scheduled for early November, showing that they have decided to shelve their differences.

The market has high hopes that the plan to inject funds into European banks will prevent the eurozone and even the global markets from a systematic liquidity crisis that could cause the global economy to plummet, they said.

The New Taiwan dollar was further lifted by a significant advance in the local bourse, with foreign institutional investors hunting bargains among the large-cap stocks in both the old economy and high-tech sectors, forex dealers said.

Two More Hurdles

The benchmark weighted index closed up 2.58 percent at 7,398.71 points on the Taiwan Stock Exchange after foreign institutional investors bought a net worth of NT$7.89 billion (US$260 million).

Concerning the forex frictions between Beijing and Washington, most analysts in Taiwan think the currency bill is unlikely to become a law even if the Senate gives it clearance.

The bill still has to clear two more hurdles.

The analysts said the bill has been manipulated as an election campaign issue in the U.S. by certain candidates in order to get more ballots.

The U.S. House of Representatives is more likely to vote down the bill.

U.S. President Barack Obama is most likely to veto the bill if both chambers approve the bill because it will increase the import costs for the U.S. and harm American consumers even more, said the analysts.

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