Taiwan Dollar Forwards Fall Most in 2 Weeks on Intervention Risk

Taiwan dollar forwards fell the most in more than two weeks on speculation the central bank may step up intervention to protect exports.

The local dollar has climbed against the greenback in each of the last six weeks, the best run in a year, as overseas investors pumped $5.4 billion into Taiwan stocks. The central bank has started inspecting major currency-trading banks to warn against speculation, Commercial Times reported on Oct. 7, citing unidentified traders. Gou Tai-Chiang, chairman of the Taiwan Electrical and Electronic Manufacturers’ Association, said he told President Ma Ying-jeou currency policy should be adjusted because of the importance of exports to the island’s economy, according to an Apple Daily report today.

“Some industry leaders are sending the message to the government that, if the Taiwan dollar appreciates further, electronics makers may start losing money,” said Tarsicio Tong, a Taipei-based currency trader at Union Bank of Taiwan. “I think the central bank will block gains to some extent.”

One-month non-deliverable forwards dropped 0.2 percent to NT$29.369 per dollar as of 4:08 p.m. in Taipei , according to data compiled by Bloomberg. That’s the biggest fall since Sept. 24. Taiwan markets will be closed tomorrow for a public holiday.

Overseas shipments, which account for around three-quarters of Taiwan’s economy, slumped 7 percent in September from a year earlier after rising in the previous four months, official data showed this week. Policy makers will step in to maintain an orderly market should irregular factors such as large short-term capital flows lead to “excess volatility,” the central bank said in a Sept. 26 statement.

Taiwan Dollar

The local dollar was little changed today at NT$29.548 against the greenback, prices from Taipei Forex Inc. show. The currency dropped 0.4 percent in the final 16 minutes of trading on suspected intervention by the central bank. 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 yield on the 1.75 percent government notes due September 2023 rose one basis point to 1.655 percent, according to Gretai Securities Market. Taiwan sold NT$30 billion ($1 billion) of five-year bonds at 1.15 percent today.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose one basis point to 3.95 percent. The overnight interbank lending rate was steady at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

Before it's here, it's on the Bloomberg Terminal.