Taiwan Dollar Forwards Fall to Three-Month Low After Fed Tapers

Taiwan’s dollar forwards fell to a three-month low after the Federal Reserve announced plans to taper stimulus that has buoyed emerging-market assets. Government bonds were little changed.

The Fed is trimming its monthly bond buying to $75 billion from $85 billion in the central bank’s first step toward unwinding its unprecedented stimulus, Chairman Ben S. Bernanke said yesterday, citing the improved labor market outlook. The greenback advanced against most major peers after the announcement and touched a five-year high versus the yen.

“The U.S. dollar strengthened against major currencies after the Fed meeting, so there’s bound to be some pressure on emerging-market currencies,” said Andrew Tsai, a Taipei-based economist at KGI Securities. “Near year-end, Taiwan’s central bank also prefers to let the currency depreciate to give companies repatriating overseas profits a boost.”

One-month non-deliverable forwards on Taiwan’s currency slipped 0.2 percent to NT$29.670 per dollar as of 9:47 a.m. in Taipei, data compiled by Bloomberg show. The contracts touched NT$29.672 earlier, the weakest level since Sept. 13.

In the spot market, Taiwan’s dollar was little changed at NT$29.755 against the greenback, prices from Taipei Forex Inc. show. It weakened 0.2 percent in the last 22 minutes of trading yesterday amid suspected central bank 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.

Low Rates

The U.S. benchmark interest rate is likely to stay low “well past the time that the unemployment rate declines below 6.5 percent, especially if projected inflation continues to run below” its 2 percent goal, the Fed said yesterday. The U.S. jobless rate dropped to a five-year low of 7 percent last month.

The yield on Taiwan’s 1.25 percent sovereign bonds due October 2018 was steady at 1.048 percent, according to Gretai Securities Market. The rate has dropped five basis points, or 0.05 percentage point, this month.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped six basis points to 3.16 percent. The overnight interbank lending rate was little changed 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: James Regan at jregan19@bloomberg.net

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