Taiwan Dollar Forwards Drop Most in a Week on Intervention Risk

Taiwan dollar forwards dropped the most in a week on speculation policy makers will curb currency gains to support exporters.

Taiwan Premier Sean Chen asked the central bank to closely monitor the effects of the Bank of Japan (8301)’s monetary easing aimed at weakening the yen, the Cabinet said in a statement yesterday. Taiwan and South Korea compete with Japan in the world market for electronic products.

“The Korean won is also looking at the Japanese yen,” said Tarsicio Tong, a Taipei-based foreign-exchange trader at Union Bank of Taiwan. (2838) “If there are big moves in the Korean won, the Taiwan central bank may take some action but the action will be gradual.”

One-month non-deliverable forwards dropped 0.2 percent to NT$29 versus the greenback as of 10:03 a.m. in Taipei, according to data compiled by Bloomberg, narrowing its premium to the spot rate to 0.1 percent from 0.5 percent yesterday. The contracts have fallen 0.3 percent this month.

Taiwan’s monetary authority has sold its currency to counter gains on most days in the past nine months, according to traders, who asked not to be identified. The central bank has been signaling to the market that it wants the currency to remain weaker than NT$29 per dollar, Tong said.

Taiwan’s dollar climbed 0.3 percent to NT$29.018 against its U.S. counterpart, based on prices from Taipei Forex Inc. The currency erased a gain of as much as 0.4 percent in the final minute of trading yesterday.

One-month implied volatility, a measure of expected moves in the exchange rate used to price options, held at 2.8 percent. It reached 2.6 percent on Jan. 22, the lowest level since September 2007.

Export orders, an indicator of shipments in the next one to three months, increased 8.5 percent in December from a year earlier, government figures showed on Jan. 21.

The yield on Taiwan’s 1.125 percent government bonds due September 2022 was unchanged at 1.163 percent, according to Gretai Securities Market.

To contact the reporter on this story: Lilian Karunungan in Singapore at lkarunungan@bloomberg.net

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

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