Taipei-The U.S. dollar rose against the Taiwan dollar Tuesday, gaining NT$0.090 to close at NT$29.240 on continued fund outflows from the country, dealers said.
A plunge in equity prices also led currency traders to cut their holdings in the Taiwan dollar, giving a boost to the U.S. dollar and marking the third consecutive session of appreciation, the dealers said.
Market sentiment was affected by caution ahead of a two-day policymaking meeting of the U.S. Federal Reserve scheduled to kick off later in the day as currency traders awaited the results of the meeting on the Fed's monetary policy, they added.
The greenback opened at NT$29.234 and moved between NT$29.180 and NT$29.242 before the close. Turnover totaled US$919 million during the trading session.
Soon after the local foreign exchange market opened, the U.S. dollar moved higher on follow-through buying as traders witnessed more foreign funds flowing out of Taiwan, the dealers said.
The fund outflows came after foreign investors who had previously shorted the U.S. dollar rushed to lock in handsome gains built up for the Taiwan dollar, which gained NT$0.329, or 1.12 percent, against the greenback last week, they said.
The weakness of other regional currencies also lent support to the U.S. dollar in the local market amid caution before the Fed concludes its policymaking meeting later in the week, the dealers said.
The South Korean won, which the Taiwan dollar tracks closely, fell almost 0.8 percent against the U.S. dollar at one point, prompting traders here to cut their holdings in the local currency throughout the session, they added.
In addition, foreign institutional selling in the local stock market also served as a factor in a decline of the Taiwan dollar, the dealers said.
According to the Taiwan Stock Exchange, foreign institutional investors sold a net NT$2.65 billion (US$90.63 million)-worth of shares on the main board, sending the weighted index down 1.29 percent at Tuesday's close.
However, Taiwanese exporters kept selling their U.S. dollars in exchange for Taiwan dollars to meet fund demand with the Lunar New Year holiday approaching, which let some air out of the greenback, the dealers said.
Source: Focus Taiwan News Channel