Central bank eases curbs on exporters selling US$

The central bank is said to have eased restrictions on exporters selling US dollars to support the local currency after record foreign stock outflows helped make it Asia’s worst performer last month.

The New Taiwan dollar yesterday rebounded from its weakest level since April last year after the central bank told some lenders that exporters’ US dollar sales would no longer face daily limits, foreign-exchange traders said.

The NT dollar, which slid about 2 percent in the previous month amid persistent equity outflows, yesterday closed down 0.35 percent to NT$32.592 against the US dollar.

New Taiwan dollar and US dollar banknotes are pictured in Taipei on Nov. 17 last year.

Photo: CNA

The move was more pronounced in one-month non-deliverable forwards, which are used to hedge currency moves. The contracts strengthened as much as 0.4 percent to NT$32.535 per US dollar after falling earlier.

“Given the underperformance of the Taiwan dollar, the headline is a signal that the authorities could be becoming less tolerant of Taiwan dollar depreciation,” Credit Agricole CIB Hong Kong branch senior emerging markets strategist Eddie Cheung (張敬勤) said.

Exporters get paid in US dollars and sell them to buy NT dollars when bringing earnings home, providing natural support for the local currency. The central bank normally limits how quickly they can convert those proceeds to prevent rapid appreciation, but easing the rules allows more US dollar selling to help offset heavy foreign stock outflows.

The bank called at least four banks yesterday morning in a rare move, without specifying how long the measures would stay in place, said the traders who asked not to be named discussing private matters.

The central bank sets different daily limits on exporters’ US dollar sales. It previously said that, as a general rule, exporters may sell up to US$10 million per day.

The limit was introduced last year after the NT dollar posted its biggest surge since the 1980s, as the central bank sought to prevent panic US dollar selling by exporters from exacerbating the rally.

The central bank’s foreign exchange department did not immediately reply to a request for comment.