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Taiwan Dollar Snaps Three-day Decline on Inflows; Bonds Decline

Taiwan’s dollar rose for the first time in four days as global funds added to their holdings of the island’s equities amid a government review on capital gains taxes. Bonds declined.

Overseas investors bought $118 million more Taiwanese shares than they sold today after net purchases of $996 million in the week ended May 17, stock exchange data show. The tax rate on investors with NT$1billion ($33 million) trading volume or more will be lowered to less than 0.1% from 2.25%, while individuals will be exempted, Taipei-based Economic Daily News reported May 15, without citing anyone. Deputy Finance Minister Tseng Ming-chung said May 9 that the levy would be reviewed.

The local dollar appreciated 0.1 percent to NT$30.03 versus the greenback in Taipei, prices from Taipei Forex Inc. show. The currency earlier touched NT$30.110, the weakest level since August 2012.

“There’s more room for appreciation in the currency” due to capital inflows into stocks, said Shawn Shih, an economist in Taipei at Sinopac Financial Holdings Co. Still, “the central bank is trying to make the Taiwan dollar weaker in line with the yen’s slide to protect exporters,” he said.

Taiwan’s central bank has intensified intervention in the foreign-exchange market to keep the island’s currency relatively stable and prevent it from rising faster than regional peers, after a surprise interest-rate cut by South Korea and the recent drop in the yen, the Wall Street Journal reported today, without citing anyone.

Forwards Gain

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, fell 10 basis points to 4.99 percent. One-month non-deliverable forwards climbed 0.5 percent to NT$29.930, ending a seven-day losing streak. The island’s current-account surplus was $11.09 billion in the first quarter, down from a record $15.93 billion in the previous three months, according to data released today.

The yield on the 1.125 percent Taiwan government bonds due March 2023 increased four basis points, or 0.04 percentage point, to 1.294 percent, according to Gretai Securities Market.

The overnight interbank lending rate was at 0.386 percent, the same as on May 17, a weighted average compiled by the Taiwan Interbank Money Center shows.

A government report today showed export orders, indicative of shipments in three months, contracted 1.1 percent in April from a year earlier, compared with a 6.6 percent drop in March.

To contact the reporter on this story: Kyoungwha Kim in Singapore at kkim19@bloomberg.net

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

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