Taiwan Dollar Drops on Stock Outflow, Intervention Speculation

Taiwan’s dollar retreated from a 17- month high, reversing an earlier advance, as overseas investors pulled money from local stocks and on speculation the central bank intervened to limit gains. Government bonds were steady.

The currency declined 0.4 percent in the last two minutes of trading. The central bank has sold its own dollar to damp its appreciation on most days in the past nine months, according to traders who asked not to be identified. Global funds sold NT$1.6 billion ($54 million) more local stocks than they bought today after an official report on Jan. 11 showed Chinese consumer prices rose by the most in seven months in December, prompting speculation monetary policy may be tightened.

“The market is concerned about China, though we need to see the trend over a few months” of whether the price pressures will continue, said George Pu a bond trader at Sinopac Securities Corp. in Taipei. The currency market also faces intervention risk, he said.

The local dollar closed down 0.1 percent at NT$29.058 against its U.S. counterpart, according to prices from Taipei Forex Inc. It rose as much as 0.4 percent to NT$28.928 earlier, the strongest level since September 2011. One-month non- deliverable forwards fell 0.1 percent to NT$28.898, a 0.6 percent premium to the spot rate, according to data compiled by Bloomberg.

One-month implied volatility in the Taiwan dollar, a gauge of expected moves in exchange rates used to price options, dropped 11 basis points, or 0.11 percentage point, to 3.27 percent, data compiled by Bloomberg show.

The central bank’s mandate is to keep relative exchange- rate stability and to intervene in the market in the event of abnormal moves, Governor Perng Fai-Nan said Dec. 19.

The yield on the 1.125 percent bonds due September 2022 was 1.171 percent, the same as Jan. 13, according to Gretai Securities Market. The overnight interbank lending rate was little changed at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

To contact the reporter on this story: David Yong in Singapore at dyong@bloomberg.net

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

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.