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Taiwan Dollar Forwards Fall for Fourth Day on China Growth Woes

Taiwan dollar forwards declined for a fourth day, the longest losing streak in more than three months, on speculation the island’s central bank will favor a weaker currency as the Chinese yuan declines.

The yuan fell for a third day as the People’s Bank of China lowered its daily reference rate for the currency amid concern Asia’s largest economy is slowing. China and Hong Kong accounted for 39.7 percent of Taiwan’s exports in 2013, constituting its biggest market.

“Taiwan’s central bank has a weakening bias as it closely follows the yuan, which is edging lower,” said Andy Ji, a Singapore-based currency strategist at Commonwealth Bank of Australia. “These two economies are interlinked.”

One-month non-deliverable forwards on Taiwan’s dollar dropped 0.2 percent to NT$30.280 against the greenback in Taipei, data compiled by Bloomberg show. The contracts earlier reached NT$30.288, the lowest level since April 4.

In the spot market, Taiwan’s currency declined 0.1 percent to NT$30.303 against its U.S. counterpart, extending its drop to a fourth day, according to prices from Taipei Forex Inc. The island’s central bank has sold the local dollar in the run-up to the close on most days since March 2012, according to traders who asked not to be identified.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose two basis points, or 0.02 percentage point, to 3.54 percent, data compiled by Bloomberg show.

China Data

A preliminary reading for China’s Purchasing Managers’ Index for manufacturing was 48.3 for April, compared with a final figure of 48 in March, according to the median estimate in a Bloomberg News survey before HSBC Holdings Plc and Markit Economics release the data tomorrow. Fifty is the dividing line between contraction and expansion.

Taiwan’s export orders rose 5.9 percent in March from a year earlier, official data released late yesterday showed. That compares with an increase of 5.7 percent the previous month and the 4.7 percent gain forecast in a Bloomberg News survey of economists.

The yield on the 1 percent government bonds due February 2019 slipped one basis point to 1.06 percent, prices from Gretai Securities Market show.

The overnight interbank lending rate was little changed at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

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