Taiwan Dollar Has Weekly Drop on Growth Concern; Bonds Advance

Taiwan’s dollar completed its biggest weekly decline in a month as slower growth in China damped the island’s export outlook. Government bonds gained.

Asia’s largest economy expanded 7.6 percent in the second quarter from a year earlier, the least in three years, according to official data. Italy’s bond rating was cut and its negative outlook reiterated by Moody’s Investors Service as the euro- area’s third-biggest economy faces higher funding costs. The Bank of Korea unexpectedly cut borrowing costs yesterday for the first time in more than three years.

“The trend of a weakening Taiwan dollar and stronger appetite for bonds will continue as global growth is losing momentum,” said Eric Hsing, a fixed-income trader at First Securities Inc. in Taipei. “Taiwan’s central bank is likely to cut interest rates soon as South Korea had already done so. Taiwan sees South Korea as its main rival in consumer electronics.”

Taiwan’s dollar fell 0.3 percent this week to close at NT$30.015 against its U.S. counterpart in Taipei, according to Taipei Forex Inc. That was the biggest drop since the five days ended June 1. The currency was little changed today. One-month implied volatility, a measure of exchange-rate swings used to price options, was steady at 3.7 percent.

Falling Yields

Taipei-based Acer Inc. (2353), the world’s third-largest computer maker, lowered this year’s shipment target to a maximum 5 percent growth from a previous forecast of a 10 percent increase, the Central News Agency cited an unidentified company official as saying. The island’s exports contracted for a fourth month in June, while inflation was the highest since January, data showed this month.

Taiwan’s monetary authority kept borrowing costs unchanged at 1.875 percent at a quarterly meeting last month. The consumer price index rose 1.77 percent in June from a year earlier, following a 1.74 percent increase the previous month, official data show.

The yield on 1.25 percent notes due March 2022 fell eight basis points, or 0.08 percentage point, this week to 1.138 percent, according to Gretai Securities Market. The yield dropped four basis points today.

The overnight interbank lending rate dropped two basis points today and this week to 0.491 percent, the lowest since April 25, according to a weighted average compiled by the Taiwan Interbank Money Centre.

To contact the reporter on this story: Fion Li in Hong Kong at fli59@bloomberg.net

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

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