Taiwan Dollar Falls to 4-Month Low, Bonds Rise on Europe Concern

Taiwan’s dollar fell to a four-month low and government bonds gained as investors cut holdings of the island’s stocks on concern Europe’s debt crisis will worsen and damp Asian growth.

The local dollar weakened 1.8 percent this month as foreign investors sold $3.7 billion more local stocks than they bought, according to exchange data. Official reports last week showed industrial production dropped for a second month in April and the jobless rate increased. Stock indexes declined across Asia today after the Bank of Spain said yesterday the country’s economy will sink further into recession.

“Taiwan’s fundamentals aren’t looking good,” said Eric Hsing, a bond trader at First Securities Inc. in Taipei. “Pessimism from Europe could drive down yields further.”

Taiwan’s dollar weakened 0.4 percent to NT$29.762 against its U.S. counterpart, according to Taipei Forex Inc. That’s the lowest level since Jan. 31. The currency’s one-month implied volatility, a measure of exchange-rate swings traders use to price options, gained 11 basis points to 5.75 percent.

The yield on the government’s 1.25 percent bonds due March 2022 fell two basis points, or 0.02 percentage point, to 1.24 percent, according to Gretai Securities Market. The overnight interbank lending rate was little changed at 0.514 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

To contact the reporter on this story: Andrea Wong in Taipei at awong268@bloomberg.net

To contact the editor responsible for this story: Sandy Hendry at shendry@bloomberg.net

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