Taiwan’s Dollar Has Best Week Since April on ECB; Bonds Decline

Taiwan’s dollar had the best week since April after the European Central Bank unveiled a bond-buying plan to contain the euro zone’s debt crisis, boosting demand for riskier assets.

ECB President Mario Draghi said policy makers agreed to an unlimited securities-purchase program to reduce interest rates for struggling nations and fight speculation of a breakup of the euro. Taiwan’s exports fell 4.2 percent in August from a year earlier, a sixth month of declines, official data showed toward the end of currency trading today. Government bonds fell the most in a month.

“Emerging-market sentiment improved sharply following the ECB bond-buying announcement,” said Dariusz Kowalczyk, senior economist and strategist at Credit Agricole CIB in Hong Kong. “Today’s data will highlight Taiwan’s exports aren’t doing well and the Taiwan dollar will underperform regional peers.”

The Taiwan dollar strengthened 0.4 percent this week to NT$29.842 against its U.S. counterpart, the biggest gain since the five-day period ended April 27, according to Taipei Forex Inc. It rose 0.2 percent today and reached NT$29.77, the strongest level since July 6.

One-month implied volatility in the currency, a measure of exchange-rate swings used to price options, was little changed at 3.6 percent. The Taiwan dollar’s one-month non-deliverable forwards climbed 0.3 percent to NT$29.73 per dollar today, according to data compiled by Bloomberg.

Government bonds dropped. The yield on Taiwan’s 1.125 percent notes due September 2022 rose one basis point to 1.179 percent, according to Gretai Securities Market. That’s the biggest decline since Aug. 9 in benchmark 10-year rates, which was little changed during the five-day period.

The overnight money-market rate held at 0.39 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

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