Taiwan Dollar Forwards Fall Most in a Month on Fed Taper Outlook

Taiwan dollar forwards declined the most in a month as the greenback strengthened after the Federal Reserve signaled it will press on with stimulus cuts.

The Bloomberg Dollar Index climbed 0.3 percent yesterday as Fed minutes showed policy makers said there is a “clear presumption in favor” of continuing to trim bond purchases by $10 billion at each meeting unless the economic outlook shows an “appreciable change.” Taiwan’s export orders contracted 2.8 percent last month, compared with the median forecast in a Bloomberg survey for a 1.3 percent gain. The disappointing data will weigh on the local currency, Credit Agricole CIB economist Dariusz Kowalczyk wrote in a note today.

“Asian currencies are reflecting the stronger greenback as there’s not much left to speculate regarding the pace of tapering,” said Michelle Tsai, a Taipei-based economist at Jih Sun Securities Co. Taiwan’s exports don’t seem to be reflecting the economic recovery in the U.S. and Europe, she added.

One-month non-deliverable forwards on Taiwan’s dollar slid 0.4 percent to NT$30.355 against the greenback as of 4:22 p.m. in Taipei, data compiled by Bloomberg show. That’s the biggest drop since Jan. 21.

In the spot market, the currency depreciated 0.2 percent to NT$30.392 per U.S. dollar, prices from Taipei Forex Inc. show, after dropping 0.3 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.

Volatility, Bonds

Taiwan’s current-account surplus widened to a record $17.1 billion last quarter from $14.9 billion in the previous period, according to figures released today.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, increased five basis points, or 0.05 percentage point, to 3.63 percent, data compiled by Bloomberg show.

The yield on the 1 percent sovereign bonds due February 2019 was little changed at 1.0810 percent, prices from Gretai Securities Market show. Taiwan will sell NT$30 billion ($990 million) of 30-year bonds at 2.28 percent tomorrow, a Bloomberg News survey of 13 fixed-income traders showed.

The overnight interbank lending rate was steady at 0.387 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

To contact the reporter on this story: Justina Lee in Taipei 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.