Taiwan Dollar Slides as Foreigners Dump Most Stocks in Two Years

Taiwan’s dollar dropped to a two-year low as overseas investors cut their holdings of local equities amid a rout across emerging markets.

Global funds sold $566 million more Taiwanese shares than they bought today, the most since September 2011 and the first net sales in 11 days, according to preliminary stock exchange data. The Taiex index lost 1.6 percent today, the biggest drop in six months. Most Asian currencies fell, extending last week’s emerging-market selloff, amid speculation the Federal Reserve will cut its asset purchases further at a Jan. 28-29 meeting.

“Many Asian currencies have been more volatile recently,” said Michelle Tsai, a Taipei-based economist at Jih Sun Securities Co. “As the market now expects the Fed to cut its bond buying by another $10 billion this week, there are concerns funds will continue to flow out of emerging markets.”

Taiwan’s dollar declined 0.3 percent to NT$30.511 against the greenback, according to prices from Taipei Forex Inc. That’s the weakest level since October 2011. The currency slipped 0.4 percent in the last two minutes of trading 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 non-deliverable forwards fell 0.3 percent to NT$30.350 per dollar, according to data compiled by Bloomberg. The contracts earlier touched NT$30.387, the weakest level since December 2011.

Bonds Rise

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, jumped 21 basis points, or 0.21 percentage point, to 4.45 percent, data compiled by Bloomberg show. The measure earlier rose to 4.48 percent, the highest since July.

The yield on the 1.125 percent government bonds due February 2019 dropped three basis points, or 0.03 percentage point, to 1.1010 percent in when-issued trading, according to Gretai Securities Market. That’s the lowest level for five-year sovereign notes since Dec. 26.

Benchmark 10-year Treasury yields touched the lowest level since November on Jan. 24, as emerging-market losses led by a 15 percent slump in the Argentine peso last week prompted investors to seek safer assets. The decline in Latin American currencies pushed Treasury rates down, driving Taiwan’s yields lower as well, said Max Liu, a fixed-income trader at Capital Securities Corp. in Taipei.

GDP Data

The local bond and stock markets will be closed from tomorrow through Feb. 4 for the Lunar New Year holiday. Taiwan’s currency and money markets will be shut Jan. 30 through Feb. 4.

The overnight interbank lending rate was steady at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

Official data tomorrow will show Taiwan’s economy expanded 1.92 percent in 2013 and 1.83 percent in the fourth quarter, compared with 1.48 percent and 1.66 percent, respectively, Bloomberg surveys of analysts show. The Fed will reduce its bond buying by $10 billion at each meeting this year before terminating the program at the end of 2014, a Bloomberg survey of economists 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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