Taiwan Central Bank Seen Reining in Currency at Two-Year High
(Bloomberg) -- Taiwan’s central bank appears to be taking steps to rein in the Taiwan dollar toward the end of the local trading day, as the currency tests the limits of policy makers’ comfort zone.
Since hitting its strongest intraday level against the U.S. dollar since April 2018 last Thursday, the Taiwan dollar has eased off at the end of each session to reverse earlier strength. Currency traders attributed the daily retreats to the actions of the central bank. They asked not to be identified because they are not authorized to comment publicly on foreign exchange markets.
The central bank did not immediately respond to two telephone calls seeking comment.
The Taiwan dollar came closest to matching last Thursday’s high during Tuesday’s session, strengthening as much as 0.6% to 29.585 to the greenback. The local currency finished 0.2% stronger at 29.704, its first gain in four trading days and its best close since April 2018.
With Taiwan’s largely successful handling of the coronavirus outbreak and a global wave of central bank easing, the island’s currency has risen 1.3% so far this year versus the greenback, the biggest gain among Asia’s major economies.
The strength has taken the Taiwan dollar outside of the central bank’s self-prescribed range of stability, potentially prompting it into action. According to the central bank’s exchange-rate policy, any move which puts the currency at least 5% from the nominal effective exchange rate’s 36-month moving average has the Taiwan dollar outside a stable range. NEER of late has been more than 5% above the moving average for the first time in more than two years.
©2020 Bloomberg L.P.