U.S. dollar closes higher to hit 29-month high

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Taipei, Aug. 29 (CNA) The U.S. dollar rose against the Taiwan dollar Monday to hit a 29-month high as foreign investors continued to move funds out of the region in anticipation of ongoing interest rate hikes by the United States Federal Reserve.

The greenback rose NT$0.178 to close at NT$30.396, the highest level since March 23, 2020, when the American currency ended at NT$30.405 against the Taiwan dollar.

It opened at the day’s low of NT$30.280, and hit a high of NT$30.416 before the close.

Not long after the foreign exchange market opened, investors rushed to dump the Taiwan dollar because of hawkish remarks made by U.S. Federal Reserve Chairman Jerome Powell on raising rates to rein in inflation.

In a speech at the annual central bank meeting held in Jackson Hole, Wyoming, on Friday, Powell said the Fed would continue to boost interest rates until it was confident the job of dampening inflation was done.

“While higher interest rates, slower growth, and softer labor market conditions will bring down inflation, they will also bring some pain to households and businesses,” Powell warned in his speech.

After Powell spoke, a growing number of analysts suggested the Fed will raise its key interest rates by 75 basis points in a policymaking meeting scheduled for September, dealers said.

The Taiwan dollar also weakened in line with other currencies in the region due to Powell’s speech, dealers said.

Such worries over a hawkish Fed also hurt Taiwan’s stock market, adding downward pressure on the Taiwan dollar, dealers said.

On Monday, the Taiex, the Taiwan Stock Exchange’s benchmark weighted index, tumbled 2.31 percent after foreign institutional investors sold a net NT$24.40 billion in shares.

Dealers said the Taiwan dollar’s heavy losses indicated that Taiwan’s central bank scaled back its intervention in the forex market, in contrast to the bank’s usual daily practice in recent sessions of acting to slow down the local currency’s depreciation.

With the Fed expected to remain aggressive on interest rates, the U.S. dollar will likely rise to around the NT$30.50 mark against the Taiwan dollar soon, dealers said.

(By Pan Tzu-yu and Frances Huang)

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