Fed moves likely to boost TWD: dealers
CNATAIPEI--The New Taiwan dollar is expected to get a boost after the U.S. Federal Reserve surprised financial markets around the globe overnight with an announcement that it has left its massive stimulus measures intact, dealers said.
September 20, 2013, 12:21 am TWN
As the Fed decided to keep pumping US$85 billion into the market each month through government bond and mortgage-backed securities purchases, ample liquidity is expected to prompt foreign investors to move their funds into Asia, a move that could lift the value of currencies in the region, including the New Taiwan dollar, the dealers said.
After the Fed announced following a two-day policymaking meeting that it is maintaining its bond-buying program, the U.S. dollar index, which tracks the greenback's movement against the currencies of the major U.S. trading partners, fell at one point to its lowest since mid-February.
In Asia, the Malaysian ringgit and the Thai baht led their regional counterparts in a rise on expectations that more spill-over effects on the back of foreign inflows from overseas will send non-U.S. dollar currencies even higher.
Before the Fed concluded its two-day meeting, the market had widely expected that the U.S. central bank would cut its monthly bond-buying by US$10 billion-US$15 billion in September and slash it by even more by the end of this year as the U.S. economy has shown signs of improvement.
However, the Fed said it needs more evidence to show that the economy's growth can be sustained before adjusting its current stimulus policy.
Fed Chairman Ben Bernanke, who had said earlier that the bank could start to scale down its fund injections later this year and end the stimulus measures by mid-2014, reiterated that a tapering-off plan remains on track but is not a “preset course.” The Fed has scheduled two more policymaking meetings by the end of this year.
The dealers said as its Asian counterparts rallied against the U.S. dollar in Thursday's session. The New Taiwan dollar is expected to follow suit to appreciate against the greenback after the local foreign exchange market reopens Monday after the four-day Mid-Autumn Festival holiday.
Asian Central Banks to Prop up US Dollar
On Wednesday, the U.S. dollar was down NT$0.008 to close at NT$29.752 in moderate trade as many investors stayed on the sidelines to await the conclusion of the Fed's policymaking meeting.
The dealers said the South Korean won might also strengthen against the U.S. dollar after the country's currency market reopens Monday after the holiday.
Central banks in Asia, including the Central Bank of the Republic of China, are expected to step in to prop up the U.S. dollar in a bid to cap the gains posted by their currencies for the sake of export growth, they said, adding that another round of currency depreciation competition is expected to start soon.
Meanwhile, the Fed's no tapering-off policy also lifted gold prices in the international markets. Gold futures for December delivery in New York jumped 4.4 percent from a day earlier in the wake of the Fed's announcement.