During the 1997 Asian financial crisis, hedge fund speculators crashed and brought down several Asian nation’s currencies. The Taiwanese central bank however, defeated George Soros attempt to crash the New Taiwan Dollar (NTD$) beyond the 30:1 TWD/USD barrier mark.
Learnt from his Taiwanese failure 13 yrs ago, somebody is back with heavy vengeance!
Billionaire investor George Soros’ hedge funds are targeting the Taiwan dollar for speculative trading, a Taiwan local newspaper reported.
George Soros, who set up an office in Hong Kong last month, is believed to have increased his speculative bets on the Taiwan dollar recently, and could have been the reason for the currency’s jump recently, according to sources.
“His purpose is not only to breach the NT$30 barrier, but to avenge his defeat in 1997,” sources added.
Last month, Soros’ hedge-fund firm Soros Fund Management LLC opened its first Asian office in Hong Kong. The new operation will focus on investment in A-share, China concept and RMB related products, according to an earlier report from China Knowledge.
Taiwan currency, the New Taiwan Dollar
Executives from HSBC Taiwan however, noted that recently they noticed the hot money from Hong Kong has been flowing into Taiwan, which is unusual, because the hot money was normally flow from Europe and the U.S.
Hot money inflows caused the Taiwan dollar hit a 13-year closing high against the USD at NT$32.45, it is the first time in two and a half years that the Taiwan dollar has breached the NT$30 mark against the US dollar, also known in the market as the “Perng Fai-nan last line of defense.” Perng is the governor of Taiwan’s central bank.
The Taiwanese central bank successfully resume the rates below the line of defense mark and it currently stands at NT$29.46/USD1
“The central bank is facing a hard battle, both domestically and internationally,” said the head of a foreign exchange dealing room. Internationally, the advantage that the central bank had in 1997 against Soros may be lost, now that the currency war against Asia is backed by the quantitative easing policy of the US government, the official added.
Domestically, the central government’s bid to undervalue the Taiwan dollar to protect the island’s export industries could also cause import prices to increase, such as the increase in oil prices.
Experts said that Soros had carefully studied the central bank’s attempts to intervene in the currency market and was able to successfully push up the Taiwan dollar through sudden, intense attacks last week.
After a failed attempt in 1997, Soros is likely to be better prepared this time, so the central bank would need to react cautiously, forex experts warned.