Taiwan’s Dollar Weakens Before Bernanke Speech; Bonds Advance

Taiwan’s dollar weakened on speculation traders are limiting currency bets until the Federal Reserve clarifies its policy intentions. Government bonds rose.

Fed Chairman Ben S. Bernanke delivers a speech on Aug. 31 in Jackson Hole, Wyoming that may shed light on the likelihood of a third round of bond purchases, a policy known as quantitative easing that boosts the supply of U.S. dollars. Additional stimulus in the world’s biggest economy may help revive Taiwan’s exports, which fell in six of the last seven months, as well as spur demand for emerging-market assets.

“Most participants are holding their breath just in case Bernanke signals any new measures,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan (2838) in Taipei. “There might be some month-end export deals coming in but the economic outlook is very bad.”

Taiwan’s dollar slipped 0.1 percent to NT$30.007 against its U.S. counterpart in Taipei, according to Taipei Forex Inc. One-month implied volatility, a measure of exchange-rate swings traders use to price options, rose 13 basis points to 3.43 percent.

The benchmark stock index declined for a third day, the longest losing streak in a month. Taiwan cut its growth forecast for the year to 1.66 percent from an earlier estimate of 2.08 percent this month after the economy shrank more than the government initially estimated in the second quarter.

The yield on Taiwan’s 2 percent bonds due July 2017 fell one basis point, or 0.01 percentage point, to 0.89 percent, according to Gretai Securities Market. The overnight money- market rate was little changed at 0.387 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

To contact the editor responsible for this story: James Regan at jregan19@bloomberg.net

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