US dollar closes lower on Taipei forex as fear of interest rates rise lessens
June 20, 2014, 12:08 am TWN
TAIPEI--The U.S. dollar fell against the Taiwan dollar Thursday, shedding NT$0.035 to close at NT$30.036 as concerns that the U.S. Federal Reserve (Fed) will raise interest rates lessened, dealers said.
Further foreign fund inflows into the local equity market added downward pressure on the U.S. dollar during most of the trading session before the local central bank entered the trading floor to help the currency recoup most of its early losses, they said.
The greenback opened at NT$30.070 and moved between NT$29.973 and NT$30.079 before the close. Turnover totaled US$689 million during the trading session.
The lower opening reflected a Fed statement overnight over U.S. monetary policy. Selling escalated to push the greenback down further before the central bank's intervention, dealers said.
After a two-day policymaking meeting wrapped up overnight, Fed Chair Janet Yellen said the U.S. central bank will continue to maintain interest rates at lows for a considerable time even after the Fed completely wind down its monthly stimulus program.
The Fed's statement made many traders in the region relieved to some extent. Before the conclusion of the Fed meeting, fears had been raised that the Fed would act sooner rather later to raise interest rates due to the higher than expected inflation data in May.
Eased concerns over an interest rate hike cycle by the Fed sparked buying in major regional currencies, such as the South Korean won, which gave a clear indication to traders in Taiwan to raise their Taiwan dollar holdings, dealers said.
With more foreign funds being moved into Taiwan, foreign institutional investors continued to serve as net buyers of NT$5.78 billion (US$192 million) worth of shares in the local market to raise demand for the Taiwan dollar and send the U.S. dollar down, they said.
Amid the downward pressure, the U.S. dollar fell below the NT$30.00 mark at one point before the local central bank stepped in to assuage some of the impact, dealers said.
As more foreign funds are likely to make their way to Taiwan, the U.S. dollar could again test the NT$30 level which the local central bank is believed to being to trying to hold, they said.