Taiwan Dollar Completes Fifth Weekly Loss as Fed Spurs Outflows

Taiwan’s dollar fell for a fifth week, its longest run of losses in 17 months, as global funds sold local stocks amid signs the U.S. is preparing to cut stimulus that’s buoyed emerging markets. Government bonds rose.

Overseas investors sold $768 million more Taiwanese stocks than they bought this week, exchange data show. Minutes of the Federal Open Market Committee’s Oct. 29-30 meeting released this week showed policy makers said bond buying may be cut in the “coming months” as the world’s largest economy improves. The Bloomberg Dollar Index, which tracks the greenback against 10 major peers, advanced 0.4 percent since Nov. 15.

“The strength of the U.S. dollar and fund outflows from Taiwan are putting some pressure on the local currency,” said Cindy Yu, a Taipei-based economist at Fubon Commercial Bank Co. “After the U.S. government shutdown dragged down the economic outlook, there’s been a turnaround in expectations as tapering in December now seems possible.”

Taiwan’s dollar weakened 0.1 percent this week to NT$29.645 against the greenback, prices from Taipei Forex Inc. show. The currency was little changed today, having slipped 0.2 percent in the final 13 minutes of trading amid suspected intervention. The monetary authority has sold the local dollar in the run-up to the close on most days since March 2012, according to traders who asked not to be identified.

Forwards, Volatility

One-month non-deliverable forwards on the Taiwan dollar declined 0.1 percent this week to NT$29.515 per dollar, according to data compiled by Bloomberg. The contracts were little changed today.

One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, decreased nine basis points this week to 3.17 percent.

Initial jobless claims in the U.S. fell to 323,000 in the week ended Nov. 16 from a revised 344,000 the previous week, official data showed yesterday. The median forecast of 47 economists surveyed by Bloomberg called for a drop to 335,000.

The yield on Taiwan’s 1.25 percent government bonds due October 2018 fell three basis points, or 0.03 percentage point, this week and two basis points today to 1.095 percent, according to Gretai Securities Market. That’s the lowest since Oct. 31.

Taiwan’s economic performance has been below expectations this year and the government will strengthen economic liberalization, President Ma Ying-jeou said at a briefing today. The central bank will hold its policy rate unchanged until the second quarter next year, according to a Bloomberg survey of economists.

“As a rate hike is unlikely in the near term, shorter bonds have been popular as a reflection of economic fundamentals,” said Baker Tu, a bond trader at Capital Securities Corp. in Taipei. “Conversely, holders of longer bonds are more conservative.”

The difference between yields on five- and 10-year bonds climbed to 64 basis points today, the widest since August 2004.

The overnight interbank lending rate was little changed today and this week at 0.388 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

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

To contact the editor responsible for this story: Amit Prakash at aprakash1@bloomberg.net

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