Taiwan Dollar Drops to Weakest Since June on Intervention Risk

Taiwan’s dollar declined to a six-month low on speculation the central bank is stepping up intervention to boost export competitiveness with South Korea and Japan.

The won has dropped 1.2 percent in two days on concern South Korea’s central bank will cut interest rates to ward off appreciation in the currency. The yen fell in December for a fifth month, taking losses since the end of July to 6 percent as of today. Exports, which account for about 60 percent of Taiwan’s economy, contracted 1.9 percent last month, a report showed today, missing the median estimate of economists in a Bloomberg survey for a 0.5 percent increase.

“South Korea has taken a lot of export orders from Taiwan already, so Taiwan doesn’t want to be even less competitive in terms of exchange rates,” said Tarsicio Tong, a Taipei-based currency trader at Union Bank of Taiwan. “Taiwan’s exports and economic growth are expected to be weak.”

Taiwan’s dollar dropped for a fourth day, weakening 0.3 percent to close at NT$30.315 against the greenback in Taipei, according to prices from Taipei Forex Inc. It reached NT$30.350, the lowest level since June 25, half an hour before trading ended after rising as much as 0.7 percent earlier to NT$30.035.

The island’s central bank has sold the currency in the run-up to the close on most days since March 2012, according to traders who asked not to be identified. Officials at the foreign-exchange department of the monetary authority weren’t immediately available to comment on the suspected intervention.

Export Rivals

Taiwan’s dollar fell 2.1 percent against the U.S. currency over the past month, compared with a 1 percent loss in the South Korean won and a 1.4 percent drop in the yen.

The island’s electronics makers such as HTC Corp. compete with regional rivals such as South Korea’s Samsung Electronics Co. and Japan’s Panasonic Corp. HTC this week posted net income that missed analysts’ estimates for a fourth quarter as sales slumped 29 percent.

The data today showed Taiwan’s trade surplus narrowed to $1.41 billion in December, less than the $3.6 billion estimate in a Bloomberg survey. Exports were unchanged in November, after falling in the previous two months.

One-month non-deliverable forwards slipped 0.2 percent to NT$30.138 per U.S. dollar, according to data compiled by Bloomberg. One-month implied volatility, a gauge of expected moves in the exchange rate used to price options, jumped 13 basis points, or 0.13 percentage point, to 4.05 percent. It earlier rose to 4.09 percent, the highest since Oct. 11, 2013.

The yield on the 1 percent government bonds due January 2019 decreased one basis point to 1.1265 percent in when-issued trading, according to Gretai Securities Market.

The overnight interbank lending rate was little changed at 0.387 percent, a weighted average compiled by the Taiwan Interbank Money Center showed.

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