Taiwan Dollar Completes Worst Week in 16 Months on Yen Weakness

Taiwan’s dollar had the worst week in 16 months as the yen’s slide to a 2 1/2-year low fanned speculation the central bank will rein in the exchange rate to protect exports.

Policy makers warned on Jan. 29 they 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. Premier Sean Chen has resigned for family and health reasons, presidential spokesman Fan-Chiang Tai-chi said today. Central bank governor Perng Fai-nan will remain in his position, the Economic Daily News reported, citing a government official it didn’t identify.

“The central bank’s been carefully watching other Asian currencies,” said Samson Tu, a Taipei-based fund manager at Uni-President Assets Management Corp., which oversees $700 million. “Looks like Perng will stay on as governor. Things shouldn’t change too much from a currency-trade perspective.”

The Taiwan dollar weakened 1.4 percent this week to NT$29.668 against its U.S. counterpart, according to Taipei Forex Inc. That’s the biggest five-day loss since September 2011. It weakened 0.3 percent today and reached NT$29.70 on Jan. 29, the weakest since Sept. 14. The yen hit the lowest level since June 2010 today.

One-month implied volatility in the Taiwan dollar, a gauge of expected swings used to price options, climbed 114 basis points, or 1.14 percentage point, to 4.52 percent during the five-day period, according to data compiled by Bloomberg. The contracts rose three basis points today.

A government report yesterday showed Taiwan’s economy expanded 3.4 percent in the fourth quarter from a year earlier, exceeding the 3 percent median estimate in a Bloomberg survey. For the whole year, gross domestic product increased 1.25 percent, after a 4.1 percent growth in 2011.

Government bonds fell from a week ago. The yield on the 1.125 percent notes due September 2022 rose two basis points to 1.18 percent, according to Gretai Securities Market. The rate slipped one basis point today.

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