Taiwan Dollar Slides Most Since 1997 This Quarter Amid Outflows

  • Global funds sell most local shares since 2012 this quarter
  • Taiwan may not ease in Dec. if China stabilizes, Fed acts: KGI

Taiwan’s dollar posted its biggest quarterly loss since the Asian financial crisis as the central bank eased monetary policy and a deepening economic slowdown in China hurt the island’s growth prospects.

Foreign investors have pulled a net $3.2 billion from local shares this quarter, the most since 2012, data compiled by Bloomberg show. Taiwan cut its policy rate for the first time since 2009 last week after expansion slowed to a three-year low. Exports, which account for about two-thirds of the economy, have slid for seven straight months and industrial production dropped for a fourth month in August. China is the island’s biggest market.

"The negative risks from China have caused outflows from emerging markets and raised expectations for monetary easing,” said Andrew Tsai, an economist at KGI Securities Co. in Taipei. "Taiwan cut rates because of concern over its growth outlook, given also that it is such an export-dependent economy.”

Taiwan’s dollar weakened 6.2 percent from June 30 to NT$33.128 versus the greenback, Taipei Forex Inc. prices show. It climbed 0.5 percent on Wednesday, the most in three weeks, as markets opened after a two-day break. A typhoon had caused them to be shut on Tuesday following a public holiday on Monday. The currency slipped 1 percent in September, capping a fifth straight month of declines.

The island’s central bank may refrain from easing further at its December meeting if growth in China stabilizes and the Federal Reserve raises U.S. interest rates, Tsai said. Economic growth slowed to 0.52 percent in the April-June quarter, from 3.84 percent in the first three months of the year.

Government bonds climbed this quarter, with the benchmark 10-year yield plunging 36 basis points, the most since 2008, to 1.14 percent, Taipei Exchange prices show.

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