Taiwan Dollar in Longest Losing Streak in Two Years Before FedJustina Lee
Taiwan’s dollar weakened for a seventh day in the longest losing streak in more than two years as investors waited for the Federal Reserve to decide on whether it will reduce its stimulus.
Thirty-four percent of economists surveyed by Bloomberg predict policy makers will start tapering the $85 billion of monthly bond purchases at a two-day Federal Open Market Committee meeting ending today. Global funds sold $73 million more of local equities than they bought this week, following three weeks of net purchases, exchange data show.
“The whole world is reducing risk now, though a small cut in stimulus would be within market expectations,” said Tarsicio Tong, a Taipei-based currency trader at Union Bank of Taiwan. “As the year-end nears, some foreign investors may also be taking profits and cutting their positions, so there may be some capital outflows.”
Taiwan’s dollar depreciated 0.1 percent to NT$29.745 against the U.S. currency today, prices from Taipei Forex Inc. show. That’s the weakest level since Sept. 18 and the longest losing streak since September 2011.
The currency slipped 0.2 percent in the last 22 minutes of trading amid suspected central bank intervention. 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 non-deliverable forwards in the Taiwan dollar fell 0.1 percent to NT$29.600 against the greenback. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, rose seven basis points to 3.24 percent.
The yield on the 1.25 percent sovereign notes due October 2018 fell two basis points, or 0.02 percentage point, to 1.049 percent, according to Gretai Securities Market. That’s the lowest level for similar-maturity government notes since July 23.
“A small reduction in Fed stimulus is within market expectations, and no reduction is bullish news, so selling pressure has been light,” said Sandy Liao, a Taipei-based fixed-income trader at KGI Securities Co. “There’s buying interest whenever yields are higher. Investors don’t expect a Taiwan rate increase until much later.”
Taiwan’s central bank, which has kept its benchmark rate at 1.875 percent since 2011, next convenes on Dec. 26. The monetary authority will not increase borrowing costs until the third quarter, according to the median estimate of 16 economists surveyed by Bloomberg News.
The overnight interbank lending rate was steady at 0.386 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.