Taipei, Jan. 1 (CNA) The Taiwan dollar benefited from the country’s strong export performance and became Asia’s strongest currency last year, after rising nearly 3% against the US dollar in 2021.
The Taiwan dollar closed at NT $ 27.690 against the US dollar on December 30, 2021, the highest level of the last trading session in 25 years, up NT $ 0.818 or 2.95%. The growth of the local currency was the highest in Asia in 2021, exceeding that of the Chinese yuan, which rose about 2.7% against the US dollar.
In 2021, several other regional currencies came under pressure. The South Korean won lost around 8.6% and the Japanese yen fell more than 10%.
Dealers said the Taiwan dollar benefited from strong export growth from Taiwan as global demand for tech gadgets remained strong thanks to emerging technologies such as 5G applications, high-performance computing devices, the Internet of Things and automotive electronics.
In addition, industries in the old economy, including steelmakers, also experienced a strong cyclical recovery, which further increased exports and in turn paved the way for a higher Taiwan dollar, dealers said. .
In the first 11 months of last year, Taiwan’s exports reached $ 405.75 billion, up 30 percent from the previous year. With imports reaching US $ 346.23 billion, up 33.8% from 2020, the country recorded a trade surplus of US $ 59.52 billion, up 11.7% from the previous year.
In November alone, Taiwan’s overseas sales totaled $ 41.58 billion, up 30.2% from 2020, marking the 17th consecutive month of year-over-year growth.
Traders said the strong exports have led many exporters to convert their greenback received abroad into Taiwanese dollars, which has boosted demand for the local currency.
The strong performance of the local stock market also supported the Taiwan dollar, with many local institutional investors preferring to keep their funds in Taiwan rather than moving their money overseas for investments.
In 2021, the Taiex, the weighted index of the Taiwan Stock Exchange, climbed 3,486.31 points or 23.7% to close at 18,218.84 points on December 30, the last trading session of the year. . The index growth was the third highest in the history of the Main Board.
In addition to a global economic recovery, dealers said, the COVID-19 pandemic has forced the restructuring of a global supply chain and in turn prompted many Taiwanese investors with overseas operations to return to Taiwan to invest, which boosted their capital spending and further pushed up demand for the Taiwan dollar.
Dealers said that these factors that favor a stronger Taiwan dollar offset the resulting impact of a rise in the U.S. dollar index, which assesses the greenback’s movement against the six currencies of Washington’s major trading partners on expectations that the Federal Reserve will launch a hiking bike rate.
The dealers added that the local central bank tended to enter the forex market at the end of the trading session by buying US dollar to limit the rise in the Taiwan dollar.
Looking ahead, dealers said Taiwan’s gross domestic product (GDP) is expected to grow by more than 4% in 2022, when export growth may continue to remain strong, so the Taiwan dollar may maintain its momentum. .
However, as the Taiex rose sharply last year, the index’s room for improvement may be limited this year, dealers said. At the same time, retail investors and life insurance companies could relocate their funds overseas, which could limit the strength of the Taiwan dollar to some extent.