Taiwan Dollar Forwards Decline as Weaker Yen Threatens Exports

Taiwan dollar forwards fell toward a seven-month low on speculation the Bank of Japan will take steps that could further weaken the yen, damaging the island’s export competitiveness. Government bonds dropped.

Global funds sold $895 million more local stocks than they bought last month, exchange data show, contributing to a 0.6 percent drop in the local dollar. Japan’s monetary authority will meet April 3 to discuss measures needed to revive economic growth and achieve its 2 percent inflation target. The yen’s 17 percent plunge against the greenback over the last six months has hurt Taiwanese exporters that compete with Japan in industries such as electronics.

“People in the market are watching out for more measures from Japan that’ll weaken the yen further,” said Tarsicio Tong, a currency trader at Union Bank of Taiwan in Taipei. “Taiwan’s dollar will probably depreciate further from the current level, testing NT$30 in the next two months.”

One-month non-deliverable forwards fell 0.1 percent to NT$29.856 as of 4:51 p.m. local time, according to data compiled by Bloomberg. It touched NT$29.874 earlier, near the NT$29.915 level reached on March 25 that was the weakest since Sept. 3.

The Taiwan dollar fell 0.2 percent to NT$29.928 against its U.S. counterpart, according to Taipei Forex Inc. It was little changed two minutes prior to the 4 p.m. finish. The central bank has sold the local currency in the run-up to the close on most days in the past year, according to traders who asked not to be identified.

Similar Exports

Central bank Governor Perng Fai-nan said March 28 that Taiwanese and Japanese exports are 38 percent similar, compared with 83 percent for South Korean and Japanese shipments.

One-month implied volatility in the Taiwan dollar, a gauge of expected moves in the exchange rate used to price options, rose 15 basis points, or 0.15 percentage point, to 3.60 percent, according to data compiled by Bloomberg.

The yield on the 0.875 percent government bonds due January 2018 climbed one basis point to 1.017 percent, according to Gretai Securities Market. The overnight interbank lending rate was little changed at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center shows.

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