Taiwan Dollar Forwards Fall Most in Three Weeks on U.S. Concern

Taiwan dollar forwards declined the most in three weeks on speculation investors will sell the currency in the spot market as the deadline for raising the U.S. debt ceiling approaches. Government bonds rose.

U.S. lawmakers must reach an agreement before the nation’s borrowing authority lapses tomorrow. Senate leaders are resuming talks aimed at avoiding a default and ending the 15-day government shutdown after the Republican-controlled House of Representatives scrapped a vote on its plan. Taiwan posted a current-account surplus of $13.8 billion in the second quarter.

“As we approach the deadline, there may be some profit-taking across” Asian currencies, said Frances Cheung, Hong Kong-based senior strategist at Credit Agricole CIB. Taiwan’s currency will be relatively stable because it has a high current-account surplus and there are no concerns about large bond outflows, she said.

One-month non-deliverable forwards fell 0.2 percent to NT$29.335 per U.S. dollar as of 4:19 p.m. in Taipei, according to data compiled by Bloomberg. That’s the biggest drop since Sept. 20.

In the spot market, the local dollar weakened 0.1 percent to NT$29.46 against the greenback, prices from Taipei Forex Inc. show. The currency was 0.2 percent lower in the last 17 minutes of trading amid 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.

One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, dropped eight basis points, or 0.08 percentage point, to 3.47 percent.

The yield on the 1.25 percent government notes due October 2018, the most actively traded bonds this week, decreased one basis point to 1.156 percent, according to Gretai Securities Market.

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.