Taiwan Dollar Snaps 2 Weeks of Gains on Intervention Speculation

Taiwan’s dollar completed its first weekly decline in three on speculation the central bank sold the currency as it approched a five-month high.

Gains may be tempered as policy makers attempt to slow appreciation that could hurt exports, according to Sacha Tihanyi, a Scotiabank strategist. Industrial output rose less than economists estimated in September, data showed this week. Emerging-market bond funds have attracted more than $42 billion this year, compared with the $17.3 billion for all of 2011, according to data research firm EPFR Global.

“The Taiwan dollar has strengthened significantly since the beginning of September and portfolio inflows have definitely played a significant part,” said Hong Kong-based Tihanyi. “Given that Taiwan remains under significant pressure on the external accounts, one has to assume that the authority is going to resist further significant appreciation.”

The Taiwan dollar fell 0.1 percent today and this week to NT$29.30 versus the greenback in Taipei, data from Taipei Forex Inc. showed. The currency touched NT$29.20 this week and NT$29.142 on Oct. 17, the strongest level since May 2. One-month non-deliverable forwards also fell 0.1 percent today and this week to NT$29.213, according to data compiled by Bloomberg.

One-month implied volatility, a measure of exchange-rate swings used to price options, declined one basis point, or 0.01 percentage point, to 3.54 percent today.

Taiwan’s central bank has intervened to stem advances in the currency in the final minutes of trading on most days in the past five months, according to traders who asked not to be identified. Monetary authorities intervene in currency markets by arranging purchases or sales of foreign exchange.

Industrial Output

Industrial output climbed 3 percent last month from a year earlier, after increasing 1.4 percent in August, the Ministry of Economic Affairs said in Taipei on Oct. 23. Economists surveyed by Bloomberg forecast growth of 6.5 percent.

The yield on the government’s 2 percent bonds due July 2017 was little changed today and this week at 0.884 percent, according to Gretai Securities Market. The overnight interbank lending rate was steady at 0.384 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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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