The Taiwan dollar on Monday fell by NT$0.144 to close at NT$29.050 against the U.S. dollar, its lowest level against the greenback in more than 18 months, as the local stock market’s benchmark weighted index fell for the fifth time in six sessions.

The Taiex fell 1.37 percent, or 236.17 points, to 17,048.37 on Monday, dragged down by losses in large-cap tech stocks, such as contract chipmaker Taiwan Semiconductor Manufacturing Co. (TSMC), the most heavily weighted stock on the local market.

The local currency opened Monday at NT$28.94 to the dollar, and soon breached the NT$29 level to hit a low of NT$29.079, currency traders said.

Central bank intervention helped lift the Taiwan dollar before the end of the session, but it still closed below NT$29 for the first time since Oct. 5, 2020 at NT$29.050 on heavy turnover of US$2.491 billion in the foreign exchange market, they said.

Foreign currency traders attributed the Taiwan dollar’s slide to moves by the U.S. Federal Reserve to raise key interest rates, the vulnerable COVID-19 situation in Taiwan, and the ongoing Russia-Ukraine war.

Banking sources forecast that the Taiwan dollar will hover between NT$28.8 and NT$29.3 against the U.S. dollar in the short term, continuing its fall that has seen it lose 4.9 percent against the greenback so far this year.

A weaker Taiwan dollar is expected to give a boost to Taiwan’s export-oriented economy, especially the local electronics industry.

TSMC, for example, benefited from the local currency’s slide in the first quarter, reporting a 12.07 percent increase in consolidated sales from the previous quarter to NT$491.076 billion, but only a 7.4 percent increase in sales in U.S. dollar terms.

According to contract chipmaker United Microelectronics Corp. (UMC), a smaller rival of TSMC, its gross margin will rise 0.3 percentage points for every 1 percent the Taiwan dollar depreciates.

For many businesses catering to consumers, however, such as restaurants and department stores, a depreciating Taiwan dollars means that imported ingredients and goods will cost more.

An executive at a large restaurant chain told CNA that prices of imported beef, a staple of most local restaurants, were raised a few months ago as commodity prices ballooned, and many in the business are concerned that a new round of price hikes could push customers away.

Source: Focus Taiwan News Channel