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Despite Fed worries, USD rises

TAIPEI--The U.S. dollar rose against the New Taiwan dollar Wednesday, gaining NT$0.005 to close at the day's high of NT$30.071 after moving in a narrow range amid caution over a two-day policymaking meeting of the U.S. Federal Reserve due to end later in the day, dealers said.

The U.S. dollar traded lower against the New Taiwan dollar during most of the session before the local central bank stepped on to the trading floor in the late session to help the U.S. currency return to positive territory at the close, they said.

The greenback opened at NT$30.070, and moved to an early low of NT$30.003 before rebounding. Turnover totaled US$702 million during the trading session.

The higher opening was a result of follow-through buying from a session earlier, but the U.S. dollar began to fall into the red early on as demand for the New Taiwan dollar was boosted by continued buying by foreign institutional investors in the local bourse, dealers said.

The weighted index on the Taiwan Stock Exchange closed up or 0.42 percent at 9,279.93 points after foreign institutional investors served as net buyers of NT$16.53 billion (US$550 million) worth of local shares.

The gains posted by the New Taiwan dollar were capped by the weakness of other regional currencies, though, as traders in the region have turned wary ahead of the Fed's announcement of its next move in monetary policy, dealers said.

In particular, a falling South Korean won, which slid for the fifth consecutive session against the U.S. dollar, acted as an important indication to traders to refrain themselves from raising their New Taiwan dollar holdings to some extent, they said.

Fears over the possibility that the Fed will raise its key interest rates sooner than the market has expected to tighten liquidity have been on the rise after the U.S. reported higher-than-expected inflation data for May.

Last month, consumer prices in the United States rose 2.1 percent from a year earlier, exceeding the previous estimate of a 2-percent increase and prompting many traders to think the Fed could deliver meeting results the market does not want, dealers said.

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