Taiwan Dollar Forwards Fall to Two-Month Low on Outflow Concern

Taiwan dollar forwards dropped to the lowest level in almost two months on speculation the U.S. will start cutting stimulus as soon as December.

Global funds sold $87 million more domestic equities than they bought in November, after bringing in $7 billion in the prior two months as the Federal Reserve maintained its monthly asset purchases. The yield on 10-year U.S. Treasuries climbed to an eight-week high as Fed Bank of Atlanta President Dennis Lockhart said reducing bond buying “ought to be on the table at upcoming meetings” by the central bank, including Dec. 17-18.

“The direction of fund flows isn’t as consistently positive as before,” said Scott Chen, a Taipei-based economist at Bank SinoPac. “As returns on U.S. Treasuries rise, the relative attractiveness of emerging-market equities has declined.”

One-month non-deliverable forwards on Taiwan’s dollar fell 0.1 percent to NT$29.596 per dollar as of 10:10 a.m. in Taipei, according to data compiled by Bloomberg. The contracts touched NT$29.620 today, the weakest level since Sept. 17.

In the spot market, the currency was at NT$29.618 against the greenback, from NT$29.636 yesterday, prices from Taipei Forex Inc. show. The local dollar lost 0.2 percent in the last eight minutes of trading yesterday amid suspected central bank intervention. The monetary authority has sold the currency in the run-up to the close on most days since March 2012, according to traders who asked not to be identified.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, decreased six basis points, or 0.06 percentage point, to 3.37 percent.

Bonds Gain

The yield on the 1.25 percent bonds due October 2018 dropped one basis point to 1.141 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 showed.

U.S. employers added 204,000 workers last month, official figures showed Nov. 8, compared with the 120,000 median estimate of economists in a Bloomberg survey. Separate Bloomberg polls conducted Nov. 8 and Oct. 17-18 showed economists predict the Fed will maintain the level of its monthly bond purchases at $85 billion until March.

To contact the reporter on this story: Justina Lee in Hong Kong at jlee1489@bloomberg.net

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

Press spacebar to pause and continue. Press esc to stop.

Bloomberg reserves the right to remove comments but is under no obligation to do so, or to explain individual moderation decisions.

Please enable JavaScript to view the comments powered by Disqus.