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Taiwan Dollar Forwards Drop Toward 8-Month Low on Yen Decline

Taiwan dollar forwards dropped toward an eight-month low on speculation the central bank will curb gains to keep pace with declines in the yen and South Korean won, the island’s biggest local competitors for exports.

The monetary authority will step in to the currency market to maintain order when volatility is excessive, according to a statement on March 28. The Taiwan dollar has depreciated 2.5 percent against the dollar this year, compared with losses of 4.9 percent and 13.1 percent for the won and yen, threatening to reduce the competitiveness of the island’s largest electronics companies Taiwan Semiconductor Manufacturing Co. and HTC Corp.

One-month non-deliverable forwards fell 0.2 percent to NT$29.81 per dollar as of 4:23 p.m. in Taipei, according to data compiled by Bloomberg. The contracts touched NT$30.10 on April 9, the weakest level since July 27. The yen is approaching 100 to the greenback for the first time in four years.

“The yen’s plunge is having an impact on many Asian currencies,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan in Taipei. “The Taiwan dollar will edge toward NT$30 slowly and will probably stay there for a while.”

The island’s currency weakened 0.1 percent to NT$29.87 against its U.S. counterpart in the spot market, Taipei Forex Inc. prices show. It was little changed one minute before the 4 p.m. close. The central bank has sold the local dollar in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

Japan Stimulus

Japan’s plan to buy 7 trillion yen ($70.2 billion) of bonds a month to stimulate its economy has spurred a decline in the yen on speculation those funds will flow out of the country in search of higher-yielding assets. Bank of Japan Governor Haruhiko Kuroda said after the weekend meetings of the Group of 20 nations that he was emboldened to press ahead with the campaign to defeat deflation, signaling the BOJ’s easing policies were unopposed by global policy makers.

Official data showed today export orders slumped 6.6 percent in March from a year earlier, compared with the median estimate of 1.9 percent gain in a Bloomberg survey. Jobless rate was at 4.18 percent, up from 4.16 percent a month earlier and matching the median estimate in a separate Bloomberg survey.

One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, rose one basis point to 3.43 percent, according to data compiled by Bloomberg.

Government bonds were steady. The yield on the 0.875 percent notes due January 2018 was little changed at 0.936 percent, according to Gretai Securities Market prices.

The overnight interbank lending rate was little changed at 0.388 percent, according to a weighted average compiled by the Taiwan Interbank Money Center.

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