Taiwan Dollar Forwards Sink to Four-Week Low as GDP Disappoints
Taiwan dollar forwards dropped to a four-week low after the government reported worse-than-expected economic growth and as speculation mounted the U.S. will cut monetary stimulus this year.
Taiwan’s gross domestic product rose 1.6 percent from a year earlier in the third quarter, the smallest gain in a year and less than the 2.6 percent median estimate in a Bloomberg News survey. The Federal Reserve said after a policy meeting this week that the U.S. economy shows signs of “underlying strength” even as it maintained monthly bond purchases of $85 billion. Economists at Citigroup Inc. and Barclays Plc said the Fed’s comments raise the possibility of stimulus being scaled back as early as December.
One-month non-deliverable forwards on the Taiwan dollar declined 0.2 percent this week and 0.1 percent today to NT$29.384 versus the greenback as of 10:15 a.m. in Taipei, according to data compiled by Bloomberg. The contracts touched NT$29.447, the weakest level since Oct. 3.
“The GDP data was disappointing,” said Andrew Tsai, a Taipei-based economist at KGI Securities. “Foreign investors are now anticipating the inflection point where U.S. economic data strengthens substantively, so fund flows into Taiwan won’t be as strong as they were in September.”
Global funds bought $449 million more Taiwanese equities than they sold this week through yesterday, resulting in net purchases for October of $2.77 billion, exchange data show. That compares with $4.21 billion in September.
In the spot market, Taiwan’s dollar strengthened 0.1 percent this week and today to NT$29.42 against the greenback, prices from Taipei Forex Inc. show. The currency closed yesterday at NT$29.455, having weakened 0.2 percent in the final 12 minutes of trading on suspected central bank intervention.
The monetary authority 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. The central bank has been intervening to keep the exchange rate from strengthening beyond NT$29.4, Taipei-based Economic Daily News reported today, citing unidentified traders.
The yield on the government’s 1.25 percent bonds due October 2018 climbed one basis point, or 0.01 percentage point, this week and today to 1.10 percent, according to Gretai Securities Market.
One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, fell two basis points this week to 3.22 percent. The measure increased eight basis points today.
The overnight interbank lending rate was little changed this week and today at 0.388 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.