Taiwan Dollar Forwards Weaken as U.S. Recovery Boosts Greenback

Taiwan dollar forwards weakened for a third day as optimism the U.S. economy is recovering boosted demand for the greenback. Government bonds were little changed before an auction today.

The Bloomberg-JPMorgan Asia Dollar Index fell for a third day after a report yesterday showed factory orders in the world’s biggest economy rose the most in five months in February. Taiwan will sell NT$40 billion ($1.3 billion) of five-year debt at 1.025 percent today, according to the median estimate of eight fixed-income traders surveyed by Bloomberg.

“The dollar is getting increasingly strong as the economy is showing more signs of improvement,” said Eric Hsing, a fixed-income trader at First Securities Inc. in Taipei. “Bond yields aren’t moving much before the auction.”

One-month non-deliverable forwards traded at NT$29.868 per dollar as of 10:15 a.m. local time, compared with NT$29.86 yesterday, according to data compiled by Bloomberg. The local dollar climbed 0.1 percent to NT$29.887, according to Taipei Forex Inc. It was trading 0.2 percent stronger one minute before the 4 p.m. finish yesterday and ended little changed.

The central bank has sold the local currency in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, fell two basis points, or 0.02 percentage point, to 3.47 percent, according to data compiled by Bloomberg.

The yield on the 0.875 percent bonds due January 2018 was 1.015 percent, compared with 1.014 percent yesterday, 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: 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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