The Taiwanese dollar soars by more than 2% in the year of the Ox

Taipei, Jan 29 (CNA) The Taiwanese dollar climbed more than 2% against the US dollar in the Year of the Ox due to the country’s strong export performance, and the upcoming Lunar New Year holiday could further boost demand as the amount of local currency issued hits a new high, according to the central bank.

The Taiwanese dollar appreciated around 2.02% against its US counterpart during the year of the Ox to close at NT$27.828 on Friday, the last trading session of the year on the Chinese calendar.

It was the third year in a row that the Taiwanese dollar appreciated against the greenback under the Chinese calendar.

In the Year of Beef, the first trading session of which took place on February 17, 2021, the Taiwanese dollar initially hovered around NT$28.3 but strengthened later as exporters sat on large revenues from abroad, while a strong performance in the local stock market, attracted funds from local and foreign institutional investors, paving the way for a higher local currency.

During the Year of the Ox, the Taiex, the weighted index of the Taiwan Stock Exchange, rose by 1,872 points or 11.84%. In 2021, Taiwan’s overseas sales hit an all-time high, recording nearly 30% annual growth to $446.45 billion, driven by strong global demand for tech gadgets and fashion items. old economy.

At the end of April 2021, the Taiwanese dollar rose further to break through the NT$28 mark against the US dollar and remained strong for the rest of the first half before consolidating in the second half, when the greenback regained a foothold on the expectations of a decision by the US Federal Reserve to tighten monetary policy, dealers said.

Currency analyst Li Chi-chan (李其展) said that as U.S. equity markets weakened in January 2022, with the Fed adopting a more hawkish tone towards its monetary policy, it is possible that the Taiwanese dollar is under pressure after trading in the local market. the foreign exchange market resumes on February 7.

Earlier this month, US Federal Reserve Chairman Jerome Powell told a hearing in the country’s Senate that the Fed would launch a series of interest rate hikes and trim its balance sheet this year by trimming its bond holdings to withdraw funds from the market.

Additionally, the Fed is under additional pressure to raise key interest rates after US President Joe Biden voiced support for the move. The market has widely anticipated that the Fed will begin a rate hike cycle in March and announce four rate hikes in 2022.

Li said the U.S. dollar index, which tracks the currencies of Washington’s six major trading partners, has risen above the 97 level, and if the uptrend continues to head towards 98 or even 99 due to a Fed hawkish, the Taiwan dollar could face a correction. when the trade begins in the year of the tiger.

However, Taiwan’s exports are expected to remain strong, which will provide exporters with plenty of funds, which could support the Taiwanese dollar, Li said.

Li urged investors to closely monitor the development of U.S. stock markets during the Lunar New Year holiday in Taiwan, as the performance should not only serve as an indication of the local stock market, but also influence the Taiwan dollar.

The currency analyst said the Taiwan dollar could fluctuate between NT$27.5 and NT$28.1 in consolidation mode against the US dollar in the first half of 2022 before the picture of the Fed’s rate hike becomes clearer.

As for the currency issued in Taiwan on Friday, the amount stood at NT$3.39 trillion ($122 billion), up 10.61 percent from the end of the Year of the Rat, according to the central bank.

The growth was the highest since 1994 or the Year of the Dog, when the increase reached 13.57%.

The central bank said the strong growth in currency issued largely reflected strong demand for funds, as many companies had to issue their end-of-year bonuses and a buying frenzy among consumers further pushed the issuance of currency.

Additionally, concerns over the COVID-19 pandemic have forced many to hold onto large funds to meet unexpected demand, the central bank said.

He added that Taiwan’s economy grew 6.28 percent in 2021, a new 11-year high, which boosted private consumption and, in turn, boosted the currency.

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