Taiwan Dollar Forwards Fall a Third Day on Fed Taper Speculation

Taiwan dollar forwards fell for a third day amid speculation the Federal Reserve will further cut its stimulus as the U.S. economy improves, reducing fund flows to emerging markets.

Retail sales in the word’s largest economy climbed 0.2 percent in December, topping the median forecast in a Bloomberg survey for a 0.1 percent gain. Philadelphia Fed President Charles Plosser said the economy is on “firmer footing” and the decision to cut debt purchases was a step in the right direction. Taiwan’s Taiex (TWSE) index of shares has retreated 0.2 percent since reaching a two-year high on Dec. 30.

“Investors are cautiously waiting for the next Fed decision to see if it will favor emerging markets,” said Forest Chen, a Taipei-based economist at Ta Chong Bank Ltd. “There’s also concern fund inflows are slowing as Taiwan’s stock market may have peaked earlier.”

One-month non-deliverable forwards on Taiwan’s dollar fell 0.2 percent to NT$30.101 against the greenback as of 10:30 a.m. in Taipei, taking the three-day decline to 0.5 percent, according to data compiled by Bloomberg.

Global funds bought $181 million more local stocks than they sold last week, less than half the amount in the previous week. The Fed said in December it will taper its monthly asset purchases by $10 billion to $75 billion starting this month. The Federal Open Market Committee next gathers Jan. 28-29.

In the spot market, the Taiwan dollar strengthened 0.2 percent to NT$30.093 against the greenback, prices from Taipei Forex Inc. show. It slipped 0.4 percent in the last 19 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.

Volatility, Bonds

One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, was little changed at 3.40 percent.

The yield on the 1 percent government bonds due January 2019 rose to 1.1314 percent in when-issued trading, from 1.125 percent yesterday, according to prices from Gretai Securities Market. The five-year notes will be auctioned today to yield 1.13 percent, according to the median estimate in a Bloomberg News survey of traders. Taiwan sold NT$35 billion ($1.2 billion) of two-year debt yesterday at 0.658 percent.

The overnight interbank lending rate was little changed today 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

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.