Taiwan Dollar Forwards Advance to Five-Month High on U.S. Data

Taiwan dollar forwards reached a five-month high after better-than-estimated U.S. retail sales brightened the outlook for the island’s overseas sales.

Taiwan’s export orders rose 1.9 percent in September from a year earlier, after dropping 1.5 percent the previous month, a Bloomberg survey showed before data due Oct. 19. Retail sales in the world’s largest economy rose 1.1 percent last month, beating the 0.8 percent gain economists forecast, an official report showed yesterday. Local-currency gains in the spot market may be limited by central bank intervention and concern Europe’s debt crisis will worsen, according to United Overseas Bank Ltd.

“There’s strong positive data from the U.S. that’s going to drive risk activities,” said Suan Teck Kin, a Singapore-based economist at United Overseas Bank. “At the end of the day, Europe will come in and offset. People worry more about Europe than the U.S.”

One-month non-deliverable forwards rose 0.1 percent to NT$29.140 as of 5:11 p.m. in Taipei, according to data compiled by Bloomberg. The contracts reached NT$29.115 earlier, the strongest level since May 9, and are at a 0.5 percent premium to the spot rate.

In the spot market, the local currency closed 0.2 percent higher at NT$29.289 against its U.S. counterpart, data from Taipei Forex Inc. showed. The currency was up 0.4 percent three minutes before the end of trading and touched NT$29.170 earlier, the strongest level since May 2. One-month implied volatility, a measure of exchange-rate swings used to price options, fell three basis points, or 0.03 percentage point, to 3.5 percent.


Taiwan’s central bank has intervened to stem advances in the currency in late trading on most days in the past five months, according to traders who asked not to be identified.

The monetary authority will probably “come in and buy U.S. dollars,” Suan said earlier today before the market closed. “Most of the time it’s for export competitiveness and to maintain an orderly exchange rate.”

The yield on the 2 percent government bonds due July 2017 increased one basis point to 0.88 percent, according to Gretai Securities Market. The overnight interbank lending rate was steady at 0.385 percent, a weighted average compiled by the Taiwan Interbank Money Centre shows.

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