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TWD declines to NT$30.589 against greenback

TAIPEI, Taiwan -- Amid the continued weakness of the Chinese yuan and uncertainty over the fate of the Taiwan-China trade-in-services pact, the Taiwan dollar on Thursday dropped NT$0.152 to close at the day's low of NT$30.589.

A falling local market, which resulted from foreign institutional selling, added downward pressure on the Taiwan dollar amid uncertainty over the fate of a trade-in-services agreement with China, the Central News Agency cited dealers as saying.

The continued weakness of the Chinese yuan also gave an indication to traders here to dump the Taiwan dollar in exchange for the U.S. dollar throughout the trading session, dealers added.

The greenback opened at NT$30.480, and moved to a low of NT$30.280 before rebounding. Turnover totaled US$1.173 billion during the trading session, according to CNA.

The U.S. dollar opened higher on follow-through buying as traders took cues from a statement by Fed chairwoman Janet Yellen, who said the Fed could end its monthly bond buying program by fall and that an interest rate hike could start in spring 2015, dealers said.

In the latest Fed policymaking meeting that wrapped up overnight, the U.S. central bank decided to cut its bond-buying program by an additional US$10 billion per month to US$55 billion.

Dealers said the Fed seems likely to kick off an interest rate hike cycle about six months earlier than the market had anticipated, which prompted investors to move their funds into the U.S. dollar, betting that the greenback will rise further in the future.

At home, foreign institutional investors sold a net NT$4.67 billion (US$153 million) worth of local shares, helping to push the weighted index on the Taiwan Stock Exchange down 1.06 percent by the close.

The foreign institutional selling in the local market also boosted demand for the U.S. dollar, which led more traders to cut their Taiwan dollar holdings, dealers said.

The yuan fell to a one-year low against the U.S. dollar at one point, prompting traders here to sell the Taiwan dollar after the People's Bank of China (PBOC) further cut the reference rate for the Chinese currency against the greenback, dealers said.

The move by the PBOC to reduce the yuan's reference rate indicated that Chinese authorities are determined to combat speculative buying of the currency, dealers said. A further cut in the reference rate is possible, which would weaken other regional currencies, they added.

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