Tuesday, April 01, 2008

Taiwan dollar falls as investors sell stocks

Taiwan's dollar fell for a third day on speculation foreign equity investors sold the currency after local stocks declined.

The island's currency weakened as the benchmark TAIEX index of shares declined 0.6 percent on concern that spending in the U.S., the world's biggest economy, will slow and cut demand for exports. Overseas investors sold more Taiwanese stocks than they bought for three straight days, according to the Taiwan Stock Exchange.

"There are some foreign fund outflows," said Cindy Wang, a currency trader at Bank SinoPac in Taipei. "Overseas investors are buying the U.S. dollar after selling stocks."

Taiwan's dollar dropped 0.01 percent to NT$30.405 against its U.S. counterpart at the 4 p.m. close of onshore trading, according to Taipei Forex Inc.

For the quarter, the Taiwan dollar gained 6.7 percent, the best performer among Asia's 10 most-active currencies outside Japan, as the central bank raised interest rates and local stocks rose 0.8 percent, attracting foreign fund inflows.

The Central Bank of the Republic of China (Taiwan) on March 27 raised the discount rate on 10-day loans to banks by 12.5 basis points to 3.5 percent. The increase boosted its advantage over the benchmark rate in the U.S. to 1.25 percentage points, the widest gap in almost 14 years.

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