Taiwan Dollar Forwards Decline as Yen Weakness Threatens Exports

Taiwan dollar forwards weakened on concern the yen’s slide to a 33-month low will hurt the island’s exports. Government bonds gained.

The yen reached its weakest level since May 2010 on speculation Japanese Prime Minister Shinzo Abe will name Asian Development Bank President Haruhiko Kuroda as governor of the Bank of Japan. Kuroda said this month the central bank has “really substantial room” for further policy loosening. Taiwan and Japan compete in the global market for electronics. Overseas funds sold $95 million more local stocks than they bought today, taking net purchases in 2013 to $1.8 billion, exchange data show.

“The Taiwan dollar will continue to weaken in line with the yen’s decline,” said Tarsicio Tong, a Taipei-based foreign-exchange trader at Union Bank of Taiwan. “The pace of depreciation should be steady, as it’s countered by stock inflows.”

One-month non-deliverable forwards fell 0.1 percent to NT$29.645 per dollar as of 4:53 p.m. local time, data compiled by Bloomberg show. In the spot market, the currency weakened 0.2 percent to NT$29.702, according to prices from Taipei Forex Inc. It has lost 1.9 percent in the past three months, the second-worst performer in Asia after the yen. One-month implied volatility, a measure of expected moves in the exchange rate used to price options, rose 20 basis points to 5.15 percent.

The central bank has sold the local currency near the close on most days in the past 11 months, according to traders who asked not to be identified.

Abe is likely to present Kuroda to the Japanese Diet in the middle of this week, Kyodo News reported, citing unidentified government sources.

The yield on the 1.125 percent bonds due March 2023 dropped one basis point to 1.22 percent, according to Gretai Securities Market. The overnight interbank lending rate was steady at 0.388 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

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