Taiwan dollar surges more than 2% as traders test central bank

The currency jumped up to 2.5 % to 29.16 per US dollars on Tuesday in the largest gain for one day since early May, after more than 2 % slipped on Monday. This last step pushed the local currency this year to 12 %, making it the best performance in Asia.

Large foreign flows were seen and the sale of US dollars by local exporters in the morning session on Tuesday, according to two merchants, who asked not to get to know them because they were not allowed to speak publicly. They said that government banks bought Greenback to soften the liquidity of the market.

The local currency has been renewed through a series of sharp fluctuations since last Friday, as the central bank has entered to verify its gains after the US dollar decreased. The authorities are keen to prevent sharp appreciation to relieve pressure on life insurance companies after a leap in exports in the trade war that sparked a wave of return to the homeland by Taiwan companies.

While the exact reasons behind the last movements were not clear, the wild fluctuations in the Taiwanese dollar during the two past two trading sessions come at a time when local companies-including life insurance companies and exporters-are preparing to issue their financial reports for a period of half a year. The sharp slide that helped the currency closed the two would drop to the local companies- many of which achieved success from the currency rally- to provide better financial results.

“The Taiwan dollar was under strong appreciation due to the standard trade surpluses, stock flows, and the hedge activity by life insurance companies in Taiwan,” wrote Joho Goh, head of Asia Research at ANZ. Since the strategic “permitted” central bank in early May, they tried to manage the currency power.

Central Bank Governor Yang Chen Long reduced the effect of the local currency Volatility At the last policy meeting in June. The monetary authority said it would continue to strengthen the “organized operation of the foreign currency market” – a line that indicated that the stability of the issue was one of its biggest concerns.

The increase in the local currency comes as foreign investors captured local shares in June, and exporters raised Greenback sales amid fears that the American currency will continue to decline. Restoring home Of the money from the island’s asset managers, she also played a role.

Fears related to the strongest dollar of Taiwan have been built since early May, when the currency was published The largest jump for one day Since the 1980s. If left unanswered, gains can lead to paper losses for life insurance companies after they codified the hedges on their foreign asset property, which are prepared in Greenback.

“The type of interventions wearing seasonal windows in nature and serves stopping, but not reverse the direction of the dollar/TWD.” “As long as the broader US dollar continues, the TWD-on-Lallly may continue.”

Lim added that the currency pair swings in both directions, as the Taiwan dollar is arrested between speculation and weakness in the Central Bank.

A little more than a month ago, Taiwan Central Bank has strengthened its warning to local trade companies due to the purchase of their currencies, as it sought to maintain the stability of the local dollar. last week, I asked foreign investors to get out of the bets on the local dollar, which was transferred through the boxes circulating on the stock exchange.