Taipei, The U.S. dollar closed higher to breach the NT$30 mark Friday after the U.S. dollar index, which tracks the currencies of Washington's six major trading partners, moved up overnight, dealers said.
The U.S. dollar rose against the Taiwan dollar, gaining NT$0.064 to close at NT$30.002. It was the second time the U.S. unit had breached the NT$30 level in about two weeks. On May 30, the greenback ended at NT$30.050 against the Taiwan dollar.
For the week, the U.S. dollar closed up NT$0.186 or 0.62 percent against the Taiwan dollar on the back of foreign fund outflows amid expectations that the U.S. Federal Reserve will continue to raise its key interests for the rest of the year, the dealers said.
On Friday, the greenback opened at NT$29.990 and moved between NT$29.969 and NT$30.006 before the close. Turnover totaled US$1.266 billion during the trading session.
The U.S. dollar got a boost from follow-through buying against the Taiwan dollar soon after the local foreign exchange market opened, as investors took cues from losses suffered by other regional currencies to cut their holdings in their local currencies, the dealers said.
The South Korean won, which the Taiwan dollar follows closely, shed more than 1 percent against the U.S. dollar at one point, prompting traders here to dump the local currency in the wake of a higher U.S. dollar index, they said.
The U.S. dollar index moved closer to the 95 mark, up 0.2 percent to a two-week high Thursday after the Fed hinted the day before that it will raise interest rates two more times this year.
The dealers said the hopes of further interest rate hikes in the U.S. market motivated foreign investors to move more of their funds out of the region, placing downward pressure on the regional currencies, including the Taiwan dollar, throughout the session.
In addition, heavy foreign institutional selling in the local equity market also served as a factor behind the Taiwan dollar's weakness, the dealers added.
According to the Taiwan Stock Exchange, foreign institutional investors sold a net NT$8.87 billion (US$296 million)-worth of shares on the main board Friday, after a net sell of NT$14.43 billion a day earlier.
Since many currency traders expect Taiwan's central bank to keep its interest rates unchanged in an upcoming quarterly policymaking meeting scheduled for June 21, a wider interest spread between Taiwan and the U.S. dollar is expected to lead to more fund outflows and depress the Taiwan dollar, the dealers said.
Source: Focus Taiwan News Channel