Taiwan Dollar Forwards Touch Two-Week High on Exports Optimism

Taiwan dollar forwards touched the strongest level in almost two weeks on optimism the island’s exports are rebounding, brightening the economic outlook. Government bonds were little changed.

Orders, an indication of demand for shipments in one to three months, rose 1.9 percent in September from a year earlier, the first increase since February, figures showed on Oct. 19. Taiwan may report on Oct. 31 that the economy grew 1.55 percent in the third quarter, after contracting 0.18 percent in the prior quarter, according to the median estimate of economists surveyed by Bloomberg.

“Exports will be a key determinant of the Taiwan dollar looking forward,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan in Taipei. “But we’re seeing limited room for more appreciation. The Taiwan dollar might weaken slightly towards year-end as the economic outlook isn’t certain yet.”

One-month non-deliverable forwards were little changed at NT$29.228 per dollar as of 4:42 p.m. in Taipei, according to data compiled by Bloomberg. They touched NT$29.086 earlier, the strongest level since Oct. 17.

Taiwan’s dollar traded at NT$29.292 in the spot market, compared with NT$29.300 at the end of last week, data from Taipei Forex Inc. showed. Tong predicts the currency will drop to NT$29.500 by the end of 2012.

One-month implied volatility, a measure of exchange-rate swings used to price options, declined 21 basis points, or 0.21 percentage point, to 3.34 percent.

The Ministry of Finance sold 20-year bonds at a record-low yield today. It auctioned NT$30 billion ($1 billion) of securities due 2032 at 1.58 percent, matching the median estimate of seven fixed-income traders surveyed by Bloomberg.

The yield on the 1.125 percent notes due September 2022 was at 1.14 percent in the secondary market, 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: Andrea Wong in Taipei at awong268@bloomberg.net

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

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