Large cash pool raises suspicions of currency speculation
Updated: 2009-10-16 07:51
(HK Edition)
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TAIPEI: Central bank Governor Perng Fai-nan reports that overseas investors have left NT$500 billion ($15.5 billion) "sitting idle" on the island. Perng thinks that's an excessive amount and it's been left by currency speculators.
"The purpose of these funds isn't clear and their motive is suspect," he told reporters in Taipei yesterday. "If these investors keep 3 percent of their funds as working capital then that's reasonable, but this is not the case now." He didn't say what the current percentage is.
The central bank said September 30 that the local currency, which has strengthened in each of the last six weeks, should reflect the economy's performance and it will "maintain order" if irregular factors cause excessive volatility. The bank sent local media a document highlighting the benefits of capital controls on October 9, two days after the government reported a 13th drop in monthly exports.
"If they buy too many US dollars and then the dollar declines, their earnings may be hurt," said Lucas Lee, an economist in Taipei at Mega Securities Co, a unit of Taiwan's third-largest publicly traded financial company. "The central bank is having some impact by giving out documents and making comments. It's waging a psychological war, reaching its target without using any troops," Lee noted.
The Taiwan dollar strengthened 2.6 percent in the past three months as global funds bought $7.4 billion more of the island's shares than they sold. It reached a one-year high of NT$31.995 versus the greenback on October 1 and traded at NT$32.237 as of 3:02 pm in Taipei.
The Commercial Times newspaper said on October 8 the central bank was trying to identify foreign-exchange speculators by searching through bond sales data for September. The bank telephoned commercial lenders last month advising against betting on a US dollar decline, two traders at foreign banks said on September 24, asking not to be identified.
Bloomberg News
(HK Edition 10/16/2009 page2)