CBC Resumes Actions to Contain Hot Money

With hot money showing no sign of relenting its offensive as the forex market resumed trading yesterday (Feb. 8), the Central Bank of China (CBC) will resort to a number of administrative measures again in its fight against hot money starting today, according to the Chinese-language Economic Daily News (EDN), sister publication of Taiwan Economic News (TEN).

The NT dollar broke the line of US$1=NT$29 in midsession, before closing at US$1=NT$29.16, for a slight gain of US$0.04. Banking executives noted that money speculators have set their sights on the previous high of US$1=NT$28.518, set during the Asian financial storm in 1997.

As a result, the CBC will once again forbid domestic banks from engaging in overseas NDF (non-delivery forward) business, keeping short position for U.S. dollar overnight, and placing orders for the last trading match. In addition, they cannot allow exporters to engage in forward forex business without proof for actual foreign-trade business.

The exchange rate of the NT dollar peaked at US$1=NT$28.89 yesterday, underscoring that hot money continued gaining strength during the New Year holiday, in order to break the US$1=NT$29 line, vigorously defended by the CBC, according to a banking executive.

The unrelenting strength of hot money, even after the breaking of the US$1=NT$30 line, has beaten the expectation of many market players and inflicted heavy loss on some traders.

(by Philip Liu)


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