U.S. dollar dips to below NT$31.3 on dovish Fed

Taipei, Dec. 14 (CNA) The U.S. dollar plunged below the NT$31.3 mark against the Taiwan dollar Thursday morning as the U.S. Federal Reserve struck a dovish tone after concluding its latest policymaking meeting overnight.

As of 11:30 a.m., the U.S. dollar fell NT$0.255 to NT$31.271 against the Taiwan dollar after moving between NT$31.260 and NT$31.440.

Soon after the market opened, the greenback came under heavy pressure in Taipei, with investors taking cues from the strength of other regional currencies, including the Japanese yen, against the American unit after the Fed meeting.

The Fed left its key interest rates unchanged at 5.25-5.50 percent for the third policymaking meeting in a row and also announced a continued trimming of its securities holdings to take more funds back from the market.

The Fed said in a statement that inflation had eased over the past year after an aggressive rate hike cycle.

In the "dot plot,” the Fed's closely watched grid of individual members' expectations, the American central bank hinted it would cut interest rates three times next year.

Benchmark 10-year U.S. treasury yields subsequently fell 4.03 percent to reach their lowest point since August, prompting investors to move their funds out of U.S. dollar-denominated assets.

The U.S. dollar index, which tracks the currencies of Washington's six major trading partners, also suffered a significant fall, dipping 0.44 percent to around 102.5.

In addition to the weakness of the U.S. dollar in the region, dealers said that a strong showing on the local stock market on the back of foreign fund inflows boosted the Taiwan dollar.

As of 11:30, the Taiex, the weighted index on the Taiwan Stock Exchange (TWSE), rose 149.72 points, or 0.86 percent, at 17,618.65 as buying was seen almost across the board after a rally on the U.S. markets, where the Dow Jones Industrial Average surged more than 500 points overnight.

Dealers said investors here were waiting for the conclusion of a quarterly policymaking meeting scheduled by the local central bank for Thursday afternoon before making any further moves.

The market has widely anticipated the local central bank will follow the Fed to leave its key interest rates unchanged after concluding the meeting.

Update

Dec. 14: U.S. dollar closes sharply lower on Taipei forex market