Foreign Capital Selling Eases, New Taiwan Dollar Edges Up to Close at 31.845, Depreciation Alert Temporarily Lifted

Taipei, Jun. 29 (CNA) Foreign investors significantly reduced their selling of Taiwanese stocks last week, easing the depreciation pressure on the New Taiwan dollar. The local currency, which had fallen below 31.9 against the U.S. dollar earlier in the day, staged a late rally to close at 31.845, up 1.5 cents. Forex traders believe that as long as the stock market does not experience another sharp decline, the depreciation alert for the New Taiwan dollar has been temporarily lifted.

The Taiwan stock market saw a significant drop of 1,683 points on June 26. Today, the market rebounded, reaching a high of 45,521.63 points before paring gains to close at 44,999.9 points, up 428.14 points. The monthly average closed around 45,355 points, failing to hold the level.

According to Taiwan Stock Exchange data, foreign investors sold NT$331.237 billion in the stock market last week. This massive selling and capital outflow by foreign investors created heavy depreciation pressure, causing the New Taiwan dollar to plummet against the U.S. dollar last week. Trading volumes on June 24 and 25 ranked among the top 10 all-time highs. Today, foreign investors sold NT$6.011 billion in stocks, a significant reduction in selling activity.

Opening at 31.88 against the U.S. dollar, the New Taiwan dollar quickly fell below 31.9 as foreign investors continued their capital outflow, reaching an intraday low of 31.935. However, sentiment shifted in the afternoon, with some foreign investors reversing their positions and buying into the market. Exporters also actively sold U.S. dollars above the 31.900 level, gradually narrowing the losses. The central bank intervened in late trading, turning the tide from depreciation to appreciation and ending a three-day losing streak. Total turnover in the Taipei and offshore foreign exchange markets was US$2.943 billion.

Forex traders pointed out that foreign investors are divesting in batches, and the selling pressure has been largely absorbed. Additionally, the conflict in the Middle East appears to be winding down, and Asian stock markets generally closed higher today, boosting investor confidence. In the afternoon, some foreign investors returned, joining exporters in selling U.S. dollars, pushing the exchange rate back above 31.8.

Forex traders believe that today's significant reduction in foreign investors' stock selling to less than NT$10 billion, compared to last week, indicates a clear improvement in market sentiment. As long as the stock market does not experience consecutive sharp declines that exacerbate depreciation pressure, exporters' demand for foreign currency at the end of the month will provide strong support for the New Taiwan dollar. The alert for breaking the 32.0 barrier should be "temporarily lifted." (Editor: Yang Kai-hsiang) 06/29/2024)