Taiwan Dollar Forwards Weaken on Export Concern; Bonds Advance

Taiwan dollar forwards fell to a one-month low before a government report that is forecast to show export orders shrank last month as demand cooled in China, the No. 1 destination for the island’s shipments. Bonds gained.

Overseas orders probably fell 3 percent in February from a year earlier, compared with an 18 percent gain in January, according to the median forecast in a Bloomberg News survey. China’s imports slumped 15.2 percent in February, the most since January 2012, according to a March 8 report.

“The key market to monitor is China where economic stimulus has been weaker than expected, which should have some downside impact on demand,” said Andrew Tsai, an economist at KGI Securities Co. in Taipei. “I expect the Taiwan dollar to be on a depreciation trend in the short term.”

One-month non-deliverable forwards weakened 0.1 percent to NT$29.766 per dollar as of 9:37 a.m. in Hong Kong, the lowest since Feb. 18, according to data compiled by Bloomberg. The local dollar was 0.1 percent stronger at NT$29.772, according to prices from Taipei Forex Inc.

One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, dropped one basis point, or 0.01 percentage point, to 3.48 percent, data compiled by Bloomberg show.

The yield on the 1.125 percent government bonds due March 2023 dropped two basis points to 1.311 percent, according to Gretai Securities Market. The overnight interbank lending rate was steady at 0.388 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

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