The biggest increase in the NT dollar in the past 25 years may reverse, and may fall to 33 yuan before the first quarter of next year. The reason is that the coming global economic recession will affect on Taiwan’s technology exports.
Mizuho Bank and RBC Capital Markets predict that the Taiwan dollar, which has appreciated more than 4 percent this month, could fall to around NT$33 to the US dollar by the first quarter of next year. The NT dollar exchange rate against the US dollar closed at NT 31.012 on Monday (28th), a heavy depreciation of 1.07 points.
Philip McNicholas, Asia Sovereign Strategist at Robeco Group in Singapore said: “The latest wave of rebound has allowed the NT dollar to regain some lost ground, but as the semiconductor economy deteriorates, the Managers Index Purchasing (PMI) is hovering at low levels, and economic growth supports the argument for the NT dollar. I can’t stand up.”
Tech giants such as Hewlett-Packard and Dell (DELL-US) are successively laying off workers to cope with the ongoing decline in demand for personal computers (PCs). China’s economic slowdown is also not favorable for Taiwan’s exports. China is Taiwan’s largest export market, and export sales are a major source of foreign exchange earnings.
TSMC (2330-TW), MediaTek (2454-TW), Hon Hai (2317-TW) and the other top three tech giants in Taiwan may still be impressive in short-term profit performance, but research strategist Bloomberg industry Marvin Chen believes profit growth in Taiwan’s technology sector could slow or even shrink next year.
Despite the recent rebound of the New Taiwan dollar, the exchange rate of the New Taiwan dollar against the US dollar has still depreciated by more than 10% this year due to the widening interest rate gap between Taiwan and the United States, which may be the largest decline since 1997. The US Federal Reserve (Fed) has raised interest rates by 375 basis points this year, but Taiwan’s central bank has only raised interest rates by 50 basis points.
Ken Cheung, Chief Asia FX Strategist at Mizuho Bank, said: “In the medium term, we expect the NTD to return to 32-33 yuan, as the economic recession will reduce demand for Taiwan’s electronics exports. The pace of increases interest rate from the central bank is also slower than that of the Fed. , the New Taiwan dollar will also remain weak compared to its neighbors.”
(Partners are not permitted to reprint this article)
