Intervention blocks Taiwan dollar fall
Intervention blocks Taiwan dollar fall
HONG KONG (Dow Jones): Massive intervention by the Taiwanese central bank blocked a potential free-fall in the New Taiwan dollar during Asian dealing Monday as market participants scrambled to sell the local currency following opposition candidate Chen Shui-bian's victory in Saturday's presidential election.
Trading in other Asian currencies was relatively quiet, with most finishing local hours a touch weaker against the U.S. dollar as markets priced in a rise in U.S. interest rates Tuesday, when the U.S. Federal Open Market Committee meets.
Dealers in Taipei described across the board demand to buy U.S. dollars as traders, investors and commercial customers sought to cover their exposure to the Taiwanese currency, afraid of heightened tensions with mainland China and domestic political instability following the weekend's poll.
At US$1.364 billion, trading volumes in the onshore spot market amounted to over twice the normal daily volume. Despite the pressure, the Central Bank of China - the Taiwanese central bank - held firm, selling enough U.S. dollars to cap the U.S. currency at its intraday high of NT$30.799, and driving the U.S. dollar down again before the close.
Drawing confidence from the central bank's determination to stamp out market volatility and prevent the U.S. dollar breaking up through NT$30.800, most participants believed the storm would soon blow over.
"This has all happened before," said the treasurer of one major foreign bank in Taipei. "It's the central bank's policy not to let the market panic, and I don't think we'll see any deviation from that any time soon."
At the close of local trading, the U.S. dollar was quoted at NT$30.791, up from NT$30.766 at Friday's close.
In the offshore market, rates on short-dated U.S. dollar/New Taiwan dollar non-deliverable forwards briefly spiked to a premium from a discount.
The Indonesian rupiah closed steady against the U.S. dollar in slow trade Monday with investors being cautious ahead of the U.S. Federal Open Market Committee meeting Tuesday.
After trading in a tight range of between Rp 7,435 and Rp 7,460, the dollar closed at Rp 7,448 in Asia, barely changed from its close of Rp 7,450 Friday.
"There was nothing much going on here," said a dealer at a Japanese bank, adding that the absence of fresh leads from the domestic economic front kept investors away from the market.
In other regional markets, the South Korean won closed moderately lower following U.S. dollar purchases executed by the state-run Korea Development Bank. At the Seoul close, the dollar was at 1,118.00 won, compared with 1,117.30 won Friday.
The Singapore dollar slipped a touch in line with the local stock market as dealers pointed to market jitters over Taiwan and expectations of higher U.S. interest rates.
Late in Asia, the U.S. dollar was at S$1.7189, up from S$1.7125 Friday.
Against the Thai baht, the dollar nudged a fraction higher to 38.005 baht, from 37.995 baht Friday, despite strong fourth quarter gross domestic product data released Monday.
On the Philippine Dealing System, the peso ended the session little changed, with the dollar at 40.960 pesos, compared with 40.963 pesos at the previous close.