The New Taiwan Dollar (NTD) yesterday hit a 23-year high during the early trading session at Taipei Exchange, as the currency continues to soar against the American greenback.
On Tuesday, NTD appreciated and reached NT$27.973 per U.S. dollar, the highest since July 1997, within minutes after trading opened. It opened at NT$28.250 and rebounded to the closing level of NT$28.402.
Before yesterday’s appreciation, the currency had risen by 1.77% and closed at NT$28.1 at the end of the year.
The NTD began to steadily rise when the Federal Reserve and other central banks, in response to the Covid-19 pandemic, doubled down on quantitative easing and in turn, drove hot money into Taiwan’s stock market.
Many Asian currencies rose throughout the last year, but the NTD has strengthened the most. Last year, the Japanese yen went up by 1.31% and the Korean won down by 3.42% against the greenback.
Analysts point out three reasons for the strong appreciation: Taiwan’s stable economy, the success in keeping Covid-19 under control, and a high dividend yield that NTD offers.
Among all, the last reason is the key, as it draws hot money to the Taiwan Stock Exchange and thus takes the currency to another level.
“Looking at a stronger Taiwan dollar, foreign investors simply moved more funds into the local market,” Alex Huang, an analyst at Mega International Investment Services Corporation, said Monday, after the weighted index on the Taiwan Stock Exchange hit a historic high again.
On Tuesday, shares in the Taiwan Stock Exchange closed up 98 points at 15,000.03 on turnover, another new high.
The recent rallies in the stock market are mainly led by stocks of large tech companies, including Taiwan Semiconductor Company, the world’s largest foundry.
The stock market is related to the strength of the NTD. With foreign funds flowing into Taiwan, share prices of major companies have gone up, boosting investor confidence, which in turn have attracted more investors into the market.
Chou Yeu-tien, a researcher at Institute of Economics of Academia Sinica, said the appreciation of NTD “offers a great opportunity for Taiwan to transform itself.” He believes it is time Taiwanese companies invest in infrastructure to enhance competitiveness.
In the era of cheap dollars, companies can also consider acquiring outstanding companies hit by the pandemic in Europe and the United States, said Chiou Jiunn-rong, economics professor at National Central University.
Cultivating one’s own competitiveness is far more useful than waiting for the trend to come to an end, he added.
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TNL Editor: Bryan Chou, Nicholas Haggerty (@thenewslensintl)
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