(Bloomberg) -- Taiwan’s dollar strengthened the most since March on Friday, a sign that the central bank is loosening its grip on the world’s most stable currency.
The Taiwan dollar rose 0.54% to close at 29.152 per greenback, the strongest level since April 2018. The currency has now broken out of a tight range, even as it continues a months-long pattern that’s seen it pare gains at the close of trading. Other Asian currencies also rose against the greenback on Friday, with the Korean won up 1.2%.
Taiwan’s central bank has acted repeatedly to limit strength in its currency, a move that’s become particularly visible to traders since July and has helped boost local exports. The Taiwan dollar was the least volatile among 31 major exchange rates against the greenback in the past three months, after the pegged Hong Kong dollar, even as foreign inflows into local technology stocks increased demand for the currency.
“The central bank will probably be more aggressive if there is excessive volatility and exuberance, but because the Taiwan dollar’s gain is in line with other Asian exchange rates, we can rule out the excessiveness,” said Christopher Wong, a senior foreign-exchange strategist at Malayan Banking Bhd.
Central bank Governor Yang Chin-long, who refers to currency intervention as “smoothing,” said Thursday that the local dollar was not “strong” when measured against trade-weighted valuation metrics. The comments suggested to analysts that the central bank is more comfortable with appreciation.
“Yang’s comments regarding the Taiwan dollar during his press conference are noteworthy,” said Khoon Goh, head of Asia research at Australia & New Zealand Banking Group Ltd. Because Yang doesn’t see the currency as overvalued on trade-weighted terms, the central bank “will be open to allowing it to appreciate, but of course they will want to influence the pace,” he said.
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