Taiwan’s Dollar Headed for a Second Weekly Loss on Yen Weakness

Taiwan’s dollar headed for a second weekly loss on speculation Asian policy makers will allow their currencies to weaken to safeguard exports after the yen fell to the lowest since 2008.

The yen touched 102.76 versus the U.S. dollar on May 15, the weakest level since October 2008, before a Bank of Japan meeting next week. The BOJ unveiled a plan on April 4 to purchase more than 7 trillion yen ($68.4 billion) of government debt a month to achieve 2 percent inflation within two years. Taiwan’s technology companies compete with Japan’s Sony Corp. and South Korea’s Samsung Electronics Co. in global markets.

“The yen will probably weaken to as low as 120 per dollar this year,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan (2838) in Taipei. “Currencies like the Taiwan dollar and the won will follow the trend.”

The Taiwan dollar fell 0.6 percent to NT$29.978 against its U.S. counterpart as of 10:18 a.m. in Taipei, Taipei Forex Inc. prices show. The currency rose 0.2 percent today, after touching NT$30.065 earlier, the weakest level since April 9.

The local dollar was trading 0.3 percent stronger one minute before the 4 p.m. close yesterday and finished 0.1 percent weaker. The central bank has sold the 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 non-deliverable forwards retreated 1 percent to NT$30.040 against the greenback during the five-day period and were up 0.1 percent today, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, surged 84 basis points to 4.94 percent from the end of last week.

Government bonds fell. The yield on the 0.875 percent notes due January 2018 rose three basis points, or 0.03 percentage point, this week to 0.921 percent, according to Gretai Securities Market prices.

The overnight interbank lending rate was steady at 0.388 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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