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Taiwan Dollar Forwards Slip on Concern Central Bank to Curb Gain

Taiwan dollar forwards fell on speculation the central bank will slow appreciation in the currency as exports recover. Bonds were little changed.

Official data tomorrow may show overseas sales rose 7.8 percent in November from a year earlier, after dropping in seven of the last eight months, according to the median estimate of economists in a Bloomberg survey. Global funds bought $247 million more local stocks than they sold today, taking net purchases this week to $801 million, exchange data show.

“There’s been a lot of foreign inflows and I think traders are testing the central bank’s limit,” said Tarsicio Tong, a Taipei-based foreign-exchange trader at Union Bank of Taiwan. (2838) “Even though we’re seeing signs of recovery in the economy, the pace is quite slow.”

One-month non-deliverable forwards declined 0.1 percent to NT$29.075 against its U.S. counterpart as of 4:27 p.m. in Taipei, according to data compiled by Bloomberg. The forwards are at a 0.2 percent premium to the spot rate, which fell 0.1 percent to NT$29.136, based on Taipei Forex Inc. prices.

One-month implied volatility, a measure of expected moves in exchange rates used to price options, dropped eight basis points, or 0.08 percentage point, to 3.09 percent.

Taiwan’s central bank has bought the greenback to counter gains in the island’s currency on most days in the past seven months, according to traders who asked not to be identified. The monetary authority’s mandate is to keep relative exchange-rate stability and to intervene in the event of abnormal moves, Governor Perng Fai-nan said on Sept. 26.

The yield on the government’s 1.125 percent bonds due September 2022 was 1.136 percent, compared with 1.137 percent yesterday, according to Gretai Securities Market. The overnight interbank lending rate was steady at 0.385 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: James Regan at jregan19@bloomberg.net

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