Taiwan dollar forwards fell for the first time in four days as the yen extended losses, after the Group of 20 nations refrained from censuring Japanese policies driving the decline. Government bonds gained.
The yen tumbled 13 percent in the past three months as policy makers in Japan sought to step up monetary stimulus. Taiwan’s central bank warned on Jan. 29 that it will intervene in the currency market if “irregular factors,” such as large fund flows, cause excessive volatility. Taiwan and Japan compete in the global market for electronic products.
“We expect the yen depreciation contagion will be felt most powerfully in Korea and Taiwan due to their proximity to Japan in distance and economic structure,” said Tim Condon, the Singapore-based head of Asian research at ING Groep NV. “The contagion began to be felt in January. The yen will depreciate further to 100 by the end of the year.”
One-month non-deliverable forwards fell 0.3 percent to NT$29.67 versus its U.S. counterpart as of 4:14 p.m. local time, the biggest drop since Feb. 8, data compiled by Bloomberg show. Local financial markets were shut last week for the Lunar New Year holiday.
In the spot market, the currency gained 0.1 percent to NT$29.709 against its U.S. counterpart from Feb. 8, according to prices from Taipei Forex Inc. It touched NT$29.752 earlier, the weakest level since Sept. 10 .
The central bank has sold the local currency near the close on most days in the past 10 months, according to traders who asked not to be identified.
One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, rose 29 basis points, or 0.29 percentage point, to 5.28 percent, according to data compiled by Bloomberg.
The yield on the 1.125 percent bonds due March 2023 dropped to 1.207 percent from 1.215 percent on Feb. 6, according to Gretai Securities Market.
The overnight interbank lending rate was little changed at 0.385 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.